6.
The IRR (internal rate of return) is a measure of
the performance of the project and gives the return based on
100% outside finance. Such return should be interpreted to
include the total return of investment in terms of both
interest and the risk involved. For the Tate's Cairn
project, with relatively minor risky elements, an IRR of
between 5 to 6% is considered to be sufficiently attractive
to bidders.
Sensitivity tests
7.
Sensitivity tests have been carried out by varying
selected assumptions of the base case. The results are
summarised overleaf.
8.
The IRRS given by the sensitivity tests are found
to be within an acceptable range of between 5.7% and 8.5%
and therefore reinforce the conclusions of the base case.