TNAG-1659-FCO40-2307-Hong-Kong-roads-and-traffic-legislation-1987 — Page 4

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.