Hi forum
perhaps this question is not very relevant to the forum but wud feel thankful if someone can help me on this
I am doing financial appraisal for an infrastructure project having a long gestation period. During the project construction period (i.e before commercial ops) the interest payable on the debt gets funded by the financial institutions. In other words the interest known as INTERST DURING CONSTRUCTION becomes part of the project cost. for eg
let project cost before IDC be US$100
at DE of 1:1 debt is $50
assuming for one year at 5% the IDC is $5
therefore project cost becomes 105 & debt raised will become 52.50 and so on unless due to the iterative process Project Cost before IDC + IDC is equal to Debt + Equity at the DE ratio. Besides IDC syndication fees also have to be added to the Project Cost and that makes the problem more vexing.
While modelling the cash flows in excel this gives rise to a Circular function.
A circular function can be removed using Macro VBA but the bankers to whom I have to submit the model refuse to accept excel workbooks containing VBA. Also the circular function have to be removed since they do not know whether the function is converging or diverging, besides a "bad" circular function may get hidden.
So can someone let me know how to remove circular functions for such a model without using VBA.
would feel exteremely obliged if someone can help me out on this pronto as the deadline is fast approaching
thanx n ciao