Ask yourself, does this section of your business case answer the following questions:
• Is the methodology and rationale for the selection of the discount rate clearly presented? Is the relationship between the discount rate and the sponsor's cost of funds discussed, particularly where the discount rate is different from the sponsor's costs of funds?
• Is the VFM model structurally and mathematically sound?
• Is the VFM analysis conducted without bias? Is it consistent with the assumptions and inputs outlined above?
• Are the sensitivity variables identified and the rationale for their selection articulated? Has a sufficiently robust sensitivity analysis been conducted? What do the results of the sensitivity analysis mean for the project's ability to achieve meaningful VFM if pursued as a P3?
• Is the VFM presented consistent with comparable projects that have been executed using similar transaction structures? Are variations clearly explained?
Figure 13: VFM sensitivity analysis variables
| Variable | Current VFM | Low | Medium | High |
| Private financing rate (bps spread) | 275 | 200 | 290 | 375 |
| Inflation (annual operations period) | 2% | 1% | 2% | 4% |
| Debt to equity ratio | 88/12 | 90/10 | 80/20 | 70/30 |
| Required equity return | 13.50% | 12.50% | 14.00% | 15% |
| Discount rate | 5.50% | 6.50% | 5.50% | 4.50% |
| Substantial completion payment amount | $xM | $xM | $xM | $xM |
| Estimated VFM | $xM x% | $xM x% | $xM x% | $xM x% |