Political Risk Component

Composent
Govt Stability

Socioeconomic Condition

Investment Profile

Internal Conflict

External Conflict

Sub-sub component
Govt Unity
Legislative Strangth
Popular Support
Sub-Total
Unemployment
Consumer confidance
Poverty
Sub-total
Contract Vaibility/Exproportion
Profit Repatriation
Payment delays
Sub-total
Civil War/Coup threat
Terrorism/ Political Violence
Civil Disorder
Sub-total
War
Cross-Border conflict
Foreign Pressure
Sub-total

Corruption
Military in politics
Religious tension
Law and order
Ethnic tension
Democratic accoutibily
Bureaucracy Quality
Total=

Hightest Score
4
4
4
12
4
4
4
12
4
4
4
12
4
4
4
12
4
4
4
12
6
6
6
6
6
6
4
100

Score
4
4
3
11
3
2.6
2
7.6
4
4
3
11
4
3.5
3.5
11
4
4
3.5
11.5
5
5
5.5
5
5
5
3
85.6

Column1
The economic risk rating
Components
GDP per Head
Real GDP Growth
Annual Inflation Rate
Budget balance as a % of GDP
Current Account as a % of GDP

Column2

Total=

5
10
10
10
15
50

Total=

10
10
15
5
10
50

The Financial Risk

Components
Foreign debt as a % of GDP
Foreign debt service as % of Export of goods and Service
Current Account as a % of Exports of goods and services
Net international Liqidity as Months of Import cover
Exchange rate stability

CPFER(Australia)

88.05

Column3
Points
5
10
8.5
9
14
46.5
Point
8
7
15
4
10
44

Current Assets
Noncurrent Assets
Current Liabilities
Noncurrent Liabilities
Shareholders Equity

Telstra (in million)

2,800
13,634
Total assets
16,434
5,305
4,250
6,879

Japan Telecom(in million)

1,091
3,152
4,243
1,404
839
2,000

Total Liabilities & Shareholders

Equity

16,434

4,243

Net sales
Cost of goods sold
Other expenses
Operating income
Nonoperating income
Amortization & Depreciation
Interest expense
Pretax income
Taxes
Extraordinary or other expenses
Net income

10,741
-3878
-2254
4609
0
-1441
-394
2774
-911
2
1865

3,117
-1,706
-888
523
17
-278
-35
227
-106
-60
61

Profit Margin
TA Turnover
ROA
Equity Multiplier
ROE

Telstra
0.1736337399
0.6535840331
0.11348424
2.3890100305
27.11%

Japan Telecom
0.0195700995
0.7346217299
0.0143766203
2.1215
3.05%

Teleglobe (in million)

886
5,021
5,907
921
832
4,154
5,907

1,701
-1,107
-268
326
11
-112
-32
193
-63
-173
-43

Teleglobe
-0.0252792475
0.2879634332
-0.0072794989
1.4220028888
-1.04%

Sales Growth rate

Variable cost (proportion of sales)
Annual Fixed cost
Cost of capital
Working Capital

0.05
0.25
125
0.1512
25.00

Initial Outlay
System cost
Construction Contingen
Other Development Cos

425
40
30

System cost

Working Capital
Total

25
520

TOTAL

250
Sales
Cash Manufac. Costs
Fixed Cost
Depreciation
Profit before tax
Tax
Profit after tax
Add Depreciation
Cash flow from operations
Salvage-Machine

Additional/Recovery of WC
Net Cash flow

(520)

NPV
MIRR
IRR

1
26.6666666667

2
26.6666666667

3
4
26.6666666667 26.6666666667

26.67

26.67

26.67

26.67

1
263
66
125
26.67
45
15
30
26.67
56.50

2
276
69
125
26.67
55
19
36
26.67
63.00

3
289
72
125
26.67
65
22
43
26.67
69.82

4
304
76
125
26.67
76
26
50
26.67
76.99

56.50

20
15.41%
15.75%

63.00

69.82

76.99

Depreciation
5
26.6666666667

6
7
8
9
26.6666666667 26.6666666667 26.6666667 26.6666667

26.67

26.67

26.67

26.67

26.67

5
319
80
125
26.67
88
30
58
26.67
84.51

6
335
84
125
26.67
100
34
66
26.67
92.40

7
352
88
125
26.67
112
38
74
26.67
100.70

8
369
92
125
26.67
125
43
83
26.67
109.40

9
388
97
125
26.67
139
47
92
26.67
118.54

84.51

92.40

100.70

109.40

118.54

10
11
12
13
14
15
26.6666667 26.6666667 26.6666667 26.6666667 26.6666667 26.6666667

26.67

26.67

26.67

26.67

26.67

26.67

10
407
102
125
26.67
154
52
101
26.67
128.14

11
428
107
125
26.67
169
57
112
26.67
138.22

12
449
112
125
26.67
185
63
122
26.67
148.80

13
471
118
125
26.67
202
69
133
26.67
159.92

14
495
124
125
26.67
220
75
145
26.67
171.58

15
520
130
125
26.67
238
81
157
26.67
183.83
25

128.14

138.22

148.80

159.92

171.58

25
233.83

Discount rate
Real Option
Initial Ivestment
Probability

0.15
Upgrade of capacity
50000000
Net cash flow each year
0.1
12000000
0.2
18000000
0.35
23000000
0.25
30000000
0.1
40000000
1

y-0
50000000
50000000
50000000
50000000
50000000

y-1
12000000
18000000
23000000
30000000
40000000

y-2
12000000
18000000
23000000
30000000
40000000

y-3
12000000
18000000
23000000
30000000
40000000

0.1
0.2
0.35
0.25
0.1
0

12000000
18000000
23000000
30000000
40000000
0

24350000

24350000

1200000
3600000
8050000
7500000
4000000
0
24350000
24350000

Probability

Option pricing
S
X
T
Rf

d1
d2
N(d1)

$69,518,723.13 Current Asset Value

50000000 Exercise (Strike) Price
4 Time to Maturity (Years)
5.00% Riskless Interest Rate (% p.a.)
0.4289219004 Volatility (% p.a.)
$1.05
$0.19
0.852277733

N(d2)
C

0.574721805
$35,722,138.95

y-4
12000000
18000000
23000000
30000000
40000000

PV of inflow
Return
Probability
Expected return
$34,259,740.35 -0.314805
0.1
-0.0314805193
$51,389,610.53 0.027792
0.2
0.0055584421
$65,664,502.34
0.31329
0.35
0.1096515164
$85,649,350.88 0.712987
0.25
0.1782467544
$114,199,134.51 1.283983
0.1
0.128398269
Total=

24350000

ent Asset Value

cise (Strike) Price
e to Maturity (Years)
less Interest Rate (% p.a.)
tility (% p.a.)

$69,518,723.13

0.3903744626
SD

Varience
0.0497278347
0.0262931779
0.0020797025
0.0260197152
0.0798535664
0.183973997
0.4289219

1998
Current Assets
Noncurrent Assets
Current Liabilities
Noncurrent Liabilities
Shareholders Equity

Telstra (in million)

2,800
13,634
Total assets
16,434
5,305
4,250
6,879

Japan Telecom(in million)

1,091
3,152
4,243
1,404
839
2,000

Total Liabilities & Shareholders

Equity

16,434

4,243

Net sales
Cost of goods sold
Other expenses
Operating income
Nonoperating income
Amortization & Depreciation
Interest expense
Pretax income
Taxes
Extraordinary or other expenses
Net income

10,741
-3878
-2254
4609
0
-1441
-394
2774
-911
2
1865

3,117
-1,706
-888
523
17
-278
-35
227
-106
-60
61

YEAR 1998
Current Ratio
Gross margin
Profit margin
Oprating margin
ROA
ROE
Debt ratio
Fixed asset TO
Debt to equity ratio

Telstra
0.5278039585
42.91%
17.36%
0.4291034354
0.11348424
0.2711149876
0.5814165754
0.787809887
1.3890100305

Japan Telecom
0.7770655271
16.78%
1.96%
0.1677895412
0.0143766203
0.0305
0.5286353995
0.9888959391
1.1215

Current Ratio
1.2
1
0.8
0.6
0.4

Current Ratio

1.2
1
0.8

Current Ratio

0.6
0.4
0.2
0
Telstra

YEAR 1998
Profit margin

Japan Telecom

Teleglobe

Telstra

Japan Telecom
17.36%

1.96%

rrent Ratio

Teleglobe (in million)

886
5,021
5,907
921
832
4,154
5,907

1,701
-1,107
-268
326
11
-112
-32
193
-63
-173
-43

Teleglobe
0.9619978284
19.17%
-2.53%
0.1916519694
-0.0072794989
-0.0103514685
0.2967665482
0.338777136
0.4220028888

YEAR 1998
Gross margin

Telstra
Japan Telecom
42.91%
16.78%

Gross margin
50.00%
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%

Gr

Telstra

Japan Telecom

Teleglobe

15.00%
10.00%
5.00%
0.00%
Telstra

rrent Ratio

Japan Telecom

Teleglobe

Profit margin
20.00%
15.00%

Teleglobe
-2.53%

Profi

10.00%
5.00%
0.00%
-5.00%

Telstra

Japan Telecom

Teleglobe

Teleglobe
19.17%

margin

om

Gross margin

Teleglobe

om

Teleglobe

margin

Profit margin

Teleglobe