Practice Test GeeksCP3P - Public-Private Partnership Certification Practice Test
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Financial & Economic Analysis Flashcards

7 cards from real CP3P practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Financial & Economic Analysis flashcards as text

  1. Which factor typically makes a PPP's weighted average cost of capital higher than government borrowing costs?

    Answer: Private financing includes risk premiums for equity and project-level debt

    Private capital prices project risk into debt margins and equity returns, so it usually costs more than sovereign debt.

  2. Value for Money in a PPP can still be achieved despite higher financing costs mainly because of:

    Answer: Efficient risk transfer, lifecycle optimization, and innovation offsetting the financing premium

    VfM rests on whole-life efficiencies and better-priced risk transfer outweighing the higher cost of private finance.

  3. A contingent liability for government in a PPP most commonly arises from:

    Answer: Guarantees such as minimum revenue or debt guarantees that are triggered only by future events

    Contingent liabilities are obligations triggered only if uncertain events occur, such as guarantee calls or termination payments.

  4. In a Monte Carlo risk analysis for a PSC, what is the output most commonly used to price retained risk?

    Answer: A probability distribution of costs from which expected values or P-values (e.g., P50, P90) are taken

    Monte Carlo simulation produces a distribution of outcomes, and expected values or percentile values are then used to quantify risk.

  5. Optimism bias adjustments in a project appraisal are intended to:

    Answer: Correct the systematic tendency to underestimate costs and durations

    Optimism bias uplifts correct for the documented tendency of appraisers to underestimate capital costs, durations, and overestimate benefits.

  6. When cash flows in a financial model are expressed in nominal terms, which discount rate should be applied?

    Answer: A nominal discount rate that includes expected inflation

    Nominal cash flows must be discounted with a nominal rate for consistency; real flows use a real rate.

  7. A Debt Service Reserve Account (DSRA) is typically sized to cover:

    Answer: A set number of months of upcoming debt service, often six

    A DSRA holds funds equal to a defined period of future debt service, commonly six months, to protect lenders against short-term cash shortfalls.