TNAG-0565-FCO40-660-Construction-of-an-underground-railway-system-in-Hong-Kong-1975 — Page 78

G.F. 323

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5.

The realisation of some assumptions will be dependent on

supporting Government policies: for instance, Government guarantees

will be necessary for most if not all of the Corporation's debt; the

ability to raise funds in the local bond market could be dependent

upon the structure of the primary and secondary markets; and sufficient

revenue is naturally dependent upon a sensible overall transport

policy.

6.

Revenue from the rental (and possibly the sale) of developed

properties (provided that land costs do not involve substantial cash

outflows) could alleviate or offset shortfalls in revenue or in sources

of re-finance.

Assumptions for Cash Flow Analysis

7.

(a) General

A computer programme has been used to assist in the calculation

of the cash flows and, for this purpose, precise assumptions have had

to be made in respect of each factor in the cash flows. Not all these

assumptions can be viewed with the same degree of certainty; for

instance, whereas capital costs are known to within a reasonably small

margin of error, the assumptions on interest rates several years ahead

are much less certain. This uncertainty is taken into account by

covering a range of probable values for each of the more important

assumptions and by maintaining internal logic: for instance, very high

rates of inflation are unlikely to be coupled with low rates of interest.

CONFIDENTIAL

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