AN INVESTIGATION OF THE SENSITIVITY BETWEEN VARIOUS FINANCIAL PARAMETERS AND THE FINANCIAL PERFORMANCE OF A SHIP BUILDING PROJECT IN BANGLADESH

Abstract

Shipbuilding projects are long-term and capital-intensive investments, and require proper financial planning to be successful. To have a successful project, a sound understanding of the relationship between initial conditions and the financial outcomes of the project is necessary. In this study, the relationship between financial parameters are estimated for the shipbuilding projects in Bangladesh. Financial parameters such as the interest rate, freight rate, debt-equity ratio, etc., and the key project metrics such as the internal rate of return, cost-benefit ratio, break-even capacity, payback period, and debt service coverage ratio are analyzed for the investment of the shipbuilding based on the present scenario of Bangladesh. Construction costs of the ship is calculated based on the present market price. Sensitivity analyses are performed amongst various financial parameters to find the relationship. It is found that a strong correlation exists between freight rate and IRR; steel price vs payback period.

Keywords: Financial impacts, shipbuilding, inland shipping, freight rate, IRR