Research On Highway Project Financial Evaluation Based On Full Life Cycle Risk Management

Highway is China’s major toll road. Highway project financial evaluation is animportant basis of investment decisions. Only equipped with economic rationality andfinancial feasibility, can business projects become acceptable.Then we can conduct theother evaluations. Because of the features of highway project such as long time span,involving aspects of equipment, technology and capital highly intensive, making its wholelife cycle risk management to is more and more importance and necessary. While riskmanagement activities make the project in the control, at the same time the process itselfcan also cause changes in project cash flows. It generates additional cash inflows and cashoutflows, and thus effects the project financial evaluation whose core is the cash flow.Therefore, this paper focus on the highway project, based on the three theories ofproject life cycle, project risk management and project financial evaluation, and tries toresearch the impact of the highway project life-cycle risk management on financialevaluation of the project. This thesis constructed highway project life-cycle riskmanagement systems, respectively, aimed to the project planning phase, construction periodand operation period of risk, then developed identification, analysis and response. Thefollowing paper discusses the constitution of the highway project cash flows. Based on thesumming up of the traditional highway project financial evaluation,this paper build ahighway project financial evaluation system which takes the impact of risk management oncash flow into consideration.This system consists of three models.They are highway projectrisk factor model, highway project risk-cash flow model based on IDEFO and highwayproject cash flow discounted model based on risk management influence. By in-depthanalysis of the trend and value of risk management influence on cash flow, we can get twomodified indicators for financial evaluation:risk management NCF and risk managementNPV and use them in highway project financial evaluation to evaluate the project’sprofitability and financial viability.So we can implement the improvement highway projectfinancial evaluation based on the consideration of full life cycle risk management.