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A comparison of the discounted present value in 1975 of all construction costs and of all net revenues from airport operations and from the sale of Kai Tak land was developed using an 11% discount rate. The selected discount rate eliminates the 6% inflation and provides a normal 5% return on a constant currency value. The comparison produced present value revenue/cost ratios greater than one. If net revenue is only counted to 1995, the revenue is 1.33 times capital cost. If net revenues are counted to 2005, the ratio to capital cost is 1.96. Both ratios show that the airport is financially feasible. From the point of view of the impact on the entire economy, of course, the 1975 present value of savings of net tourist income, as discussed previously, would have to be added to the revenue side, and the ratio of benefits to cost would be more than doubled.
The analysis indicates that the airport will easily cover all capital costs and interest from internally generated revenues and from the sale of Kai Tak land under the most probable traffic forecast. An analysis was also made of the ability of the airport to cover costs if the traffic only equalled the low end of the forecast range. This analysis indicated that the lower levels of net revenue received under the low forecast would require approximately five more years to cover all outstanding debts, but that all debts would be covered by 1995.
On the basis of the foregoing analysis, it is clear that the new airport would be financially self-supporting.
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