Simple Prediction Formula for Proportion Installment Interest Rate in a Private Finance Initiative Project

Private Finance Initiative (PFI) projects aim to develop public facilities using private funds. Installment interest payments must be predominant in PFI project costs. The proportion of installment interest depends upon the business period, payment method, interest rate, and other factors. However, prediction of the installment interest is not simple. Cost simulation based on various assumptions has been required for planning PFI finance project. A simplified estimation formula for installment interest rate based on cost evaluations using wide range of comparable conditions is proposed in this paper. The applicability of the proposed formula is also discussed and verified. The proportion of installment interest of a PFI project can be estimated to sufficient accuracy using the proposed formula.