CASH FLOW PROJECTIONS

Successful projects require careful monitoring of expenditures, revenues, and resultant cash flow. Parsons extends its financial planning services to its clients to assist with project viability analysis, project execution, and financial mitigation plans. The cash flow analysis incorporates annual revenue, total expenses, financing costs, operating profit, cost recovery time, and long-term return on investment. We analyze projects with respect to economic feasibility by examining the primary variables that affect net cash flow:

• Capital cost
• Production or system rates
• Interest rates
• Quantity of the product or services

Reasonable ranges are established for each primary variable. Our objective is to maintain a positive cash position throughout the life of a project. Business teams optimize the project's cash flow through negotiations with suppliers, financial institutions, and public agencies.

Parsons investigates various methods of raising revenues to support the project. Sources of revenue are limited to those that appear to be within the economic capability of the location and that can be obtained within the present fiscal structure or through modification of existing statutes. Investigations are made with regard to augmenting the financial position of the project by grants, loans, and assistance. Where the economies of the project can be improved significantly by allocating a portion of the capital costs to other entities, Parsons identifies these potential entities and the probable extent of their help. To further reduce cash flow impacts of the proposed project on the owner, the contract negotiating team pursues better pricing and structuring of project contracts.

We study economic cases that consist of various configurations and schedule options. For each case, we develop economic estimates and input them into cash flow models. Parsons predicts the profitability of each case in terms of discounted cash flow rate of return to equity capital. We calculate sensitivity analyses on these rates of return to determine the impact of variations in revenue, feed stock costs, and capital investment costs.

Projects

• Arizona Water Commission, Economic Analysis of Water Diversion and Aqueduct System
• Fulton County Program and Construction Management Services Project
• Hainan Island World Trade Center Feasibility Study and Development
• Comprehensive economic analysis for a grassroots refinery to be located in Thailand
• Edison School Program, Nationwide Privatization of Public Schools