Matthew Kvilvang FINE 418 Module 7 Group Project Final

docx

School

Embry-Riddle Aeronautical University *

*We aren’t endorsed by this school

Course

418

Subject

Finance

Date

Jan 9, 2024

Type

docx

Pages

Uploaded by matthewkvilvang

1 Group Project Overview Matthew J. Kvilvang Andrew Bates Rhasheena Moore Hursh Sanghavi Embry Riddle Aeronautical University – WW FINE – 418 Professor Dimitrios Siskos December 10, 2023

2 Group Project Overview Introduction Capital infrastructure improvement project is designed to improve an airport’s pre- existing infrastructure and assets to meet the demand of modern-day air travel. Cargo operations, and passenger airline operations are at an all-time high and many airports in the United States are already at, or above capacity. Procurement of the necessary funding to complete a project of this size is a highly strategic and vital component of the puzzle. Funding for a project of this size can easily reach above the one hundred million marks. Additionally, most airports do not have the capital on hand to simply “buy” the project. Airports rely on many capital financing options, such as investors, federal grants, tax revenue, and aeronautical and non-aeronautical revenue streams to fund these projects. The ability to receive funding for a project, complete the project, and continue to make money is an airport's main goal, aside from supporting local economies and the airline/cargo industry. Rationale There are over 5,200 airports in the United States including, general aviation airports, small to large commercial service airports. In recent years, the number of airports in the United States has also been reducing due to the consolidation of the aviation market as well as the lack of funds to improve and upgrade the infrastructure that is currently present. As of September 2023, the federal government has allocated 1.058 billion dollars (about $3 per person in the US) in Airport Improvement Grants (AIG) ( 2023 AIP Summary (All Grants) , n.d.). This is an incredibly significant drop when compared to 2022, in which at the end of the year, the federal government allocated around 3.785 billion dollars (about $12 per person in the US) in AIG ( 2022 AIP Summary (All Grants) , n.d.). Even if the assumption was made that the

3 projects that were completed in 2022 provided the infrastructure for the future in the United States, the AIG for 2021 was 10.342 billion dollars ( 2021 AIP Summary (All Grants) , n.d.). This trend suggests that the funding the airports are receiving to improve their capital infrastructure is dwindling and a solution is needed to allow for growth and expansion of the airports in the United States. The lack of funding for Capital Infrastructure does not only lead to a limit in revenue for airports, but it is also a safety problem where deteriorated infrastructure, equipment and security systems could lead to significant safety risks and hazards for airport operations. The outdated infrastructure also does not allow the airport to accommodate the growing demand for travel, hindering economic growth. In the aviation industry, the competition is fierce, and airports need to continuously upgrade and improve to be able to compete to remain attractive to airlines and passengers and with the lack of funding, these airports start to lose out to their competitors who do have other sources of funding. The United States’ Airport infrastructure improvement needs have increased to 151 billion dollars (about $460 per person in the US) from 115 billion dollars (about $350 per person in the US) in 2021 (ACI, 2023.). This shows that the need for funds far outweighs the amount that is being given out by the federal government. The main limitation of AIG is that the funds cannot be directed towards terminal projects, which make up most of infrastructure needs. The funding that is needed by airports for Capital Infrastructure Improvement would support many goals set by the United States, such as the net-zero carbon emissions plan by 2050. The improvements at the airports will allow them to be more attractive to airlines that rely on efficient and safe airport operations to maintain their network connectivity and profitability.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

4 Capital Infrastructure Improvements would also ensure that all passengers within the United States would be able to experience a safe, seamless, and secure travel around the country. In this proposal, we will address the gap left by AIG, the lack of funding for terminal projects, which make up most of the airport's infrastructure needs. The solution proposed will ensure that airports can expand and grow, enhancing their safety and security. It will also ensure that the airports can future proof themselves, create jobs and grow the local economy through increased capacity and efficiency. Organization To acquire funding for airport infrastructure, a diverse team is required with expertise in several key areas. The team needs to be able to understand existing funding models, revenue streams, and cost structures to be able to identify potential funding gaps and tailoring solutions to individual airport needs. Another skill necessary is the ability to assess current infrastructure conditions, identifying critical upgrade needs, and developing cost-effective project plans. The airports also need to be able to build relationships with government officials, industry stakeholders, and community groups to garner support for funding initiatives. This will help to influence policy changes that favour airport infrastructure investment. To ensure that our solution can stay current and effective, the airport needs to be able to employ data-driven approaches to assess market trends, project infrastructure needs and costs, and evaluate potential return on investment for various funding models. Project Description The goal of the project is to effectively compensate for the inefficient funding granted by the Airport Improvement Program. Larger airports only receive a tenth of the federal funding

5 with smaller regional airports receiving up to seventy-five percent of the federal grant (TRB’s Cooperative Research Programs, 2023). This can be contributed to passenger volume and larger airports can cater to more aircraft and airlines generating larger capital than their smaller counterparts. But, aeronautical and nonaeronautical revenue may still not be enough. Airport managers can collaborate with Public-Prive Partnerships (PPPs) to not only help generate money coming from private investors but also delegate projects that are needed but do not have the funds or staffing to work the process. Unbelievably expensive construction such as terminal renovations, expansions, and flightline improvements can be possible with a percentage of the profits going toward paying the private investors. Case studies have illustrated the benefits to partnering with private companies. Snohomish County Airport in Everett, Washington, catered mostly to their primary business partner Boeing, the company used their facilities to construct their twin-aisle aircraft. The airport manager made an agreement with Propeller Airports to construct a terminal and other necessary construction to create commercial traffic at the airport. It only took a little over two years and $40 million dollars to open the airport to the public with 3 operating airlines (Wolinetz et al, 2021). Airport PPPs utilize special purpose vehicles (SPVs) to help invest in infrastructure, runways and taxiway repairs, and expansions for the airport. SPVs are subsidiary contracts that help these private companies generate assets by enlisting multiple companies and investors to put their assets toward the SPV. Airports in the United Kingdom that are privatized utilize this technique to get the assets needed for projects faster, build their portfolio, and to allocate the risks so they do not take all the burden incase the project is a failure.

6 Budget Airports are highly capital-intensive operations that require even larger capital to maintain and expand as future projected passenger growth requires it. Figure 1 illustrates the approximate costs to create or renovate major airport structures (Locknear, 2023). These figures do not count for other equipment needed such as more de-icing, fueling, and baggage equipment for the possible new terminal expansion. Figure 1 Cost to Build an airport: 2023 Price Breakdown Proposing a Public-Private Partnership can create an opportunity for the airport to raise funds and build these long-term projects in half the time than waiting on Federal grants and any excess aeronautical and nonaeronautical revenue to build much needed upgrades. PPP’s allow airports to leverage available funding to their specific needs. Infographic

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

7 Rhasheena. Summary Rhasheena.

9 References 2021 AIP Summary (All grants) . (n.d.). Federal Aviation Administration. https://www.faa.gov/airports/aip/grant_histories/2021 2022 AIP Summary (All grants) . (n.d.). Federal Aviation Administration. https://www.faa.gov/airports/aip/grant_histories/2022 2023 AIP Summary (All grants) . (n.d.). Federal Aviation Administration. https://www.faa.gov/airports/aip/grant_histories/2023 Airports Council International (ACI). 2023 U.S. Airport Infrastructure Needs Report: Growing Needs Heighten Urgency to Modernize America’s Airports. (2023). https://airportscouncil.org/wp-content/uploads/2023/03/2023ACI- NAInfrastructureNeedsReportFINAL.pdf

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Related Documents

NPV Crossover.xlsx

WSJ News Brief Chapter 8 William Boswell.docx

Written ROE Exam 1 William Boswell 2.docx

Written ROE Exam 1 William Boswell.docx

Stock and Bond Investments - Chapter 13 Assignment - Part 1.docx

Matthew Kvilvang FINE 418 Module 4 Assignment.docx

Matthew Kvilvang FINE 418 Module 6 Assignment.docx

Chapter 3 Exercises.xlsx

undergrad_2021_midterm_solutions.docx

Spring 2019 exams and solutions (1).pdf

Practice Problems and Solutions - Topic 11 - REITs.pdf

Module 5 Critical Thinking FIN300-1.doc

Related Questions

nku.4 give in table format or i will give you down vote

Typed plz and asap thanks

i need the answer quickly

Year Investment A 2016 $400.000 2017 $400.000 2018 $400.000 2019 $400.000 2020 $400.000 Investment B $100.000 $100.000 $100.000 $1.000.000 $1.000.000 calculate the Npv of both project

Hi please provide stepwise solution of all and not handwritten please good way ill like.

nku.8

NEED the correct EXCEL INPUT, not just the number answer, please provide the excel code to get the answer from the image

Solve this one not use chatgpt

Q. 1 purchase of equipment in the coming year. The capital budget is limited to $5,000,000 for the year. Lori Alleyne, staff analyst at McGloire's, is preparing an analysis of the three projects under consideration by Joyanne McGloire, the company's owner. McGloire Construction is analyzing its capital expenditure proposals for the A в D Project A Project B Project C 1 Projected cash outflow Net initial investment 2 3 $3 000 000 $1 500 000 $4 000 000 4 5 Projected cash inflows Year 1 $1 000 000 1 000 000 1 000 000 1 000 000 $ 400 000 $2 000 000 7 Year 2 900 000 2 000 000 8 Year 3 800 000 200 000 Year 4 100 000 10 11 Required rate of return 10% 10% 10% 1. Because the company's cash is limited, McGloire thinks the payback method should be used to choose between the capital budgeting projects. a. List two benefits and two limitations of using the payback method to choose between projects? b. Calculate the payback period for each of the three project Ignore income taxes. Using the payback…

Calculate the profitability index for the below projects and indicate your order of choices. Project Present Value Investment A $145,000 $95,000 $135,000 $80,000 $175,000 $110,000 Select one: a. B, A and C b. A, C and B c. B, C and A d. C, B and A B с

Answer all the subparts 1,2,3 asap

Pls solve all 3 parts of this question

Exhibit 2.3A Examp'e Comparing Two Projects Using the Payback Method Project A Project B Formulas Investment Annual saving 5750,000 5215,000 $250.000 580,000 Project A Payback 07/D8) Project B Payback (7/P8) Payback Period" Rate of Return"* Project A: Rate of Return (06/D7) Project D. Rate of Return (F8/P7) Accept/Reject Exclanetion Project A Accept/Reject Accept is Payback<5 Years and Rate of Return 15% Project B * Note: Parbnck does not use she time valce of money ** Note: Rate of returnis reciprocalof Fayback

126 Kildare Medical Center, a for-profit hospital, has three investment opportunities: (1) adding a wing for in-patient treatment of substance abuse, (2) adding a pathology laboratory, and (3) expanding the outpatient surgery wing. The initial investments and the net present value for the three alternatives are as follows: Substance Abuse Laboratory Outpatient Surgery Investment $1,500,000 $500,000 $1,000000 NPV 222,000 140,000 135,000 Although the hospital would like to invest in all three alternatives, only $1.5 million is available. Required: 1. Rank the projects on the basis of NPV, and allocate the funds in order of this ranking. If a blank requires an entry of zero, it can be left blank or answered with a "0". Ranking Project Allocation Substance abuse wing $fill in the blank 2 Laboratory $fill in the blank 4 Outpatient surgery wing $fill in the blank 6 What project or projects were selected?Laboratory and outpatient…

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:9781260013962

Author:BREALEY

Publisher:RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:9781337909730

Author:Brigham

Publisher:Cengage

Foundations Of Finance

Finance

ISBN:9780134897264

Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:Pearson,

Fundamentals of Financial Management (MindTap Cou...

Finance

ISBN:9781337395250

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i...

Finance

ISBN:9780077861759

Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:McGraw-Hill Education

SEE MORE TEXTBOOKS