Client Name

Pakistan State Oil (PSO)

Faculty Advisor

Dr. Saqib Sharif

SBS Thought Leadership Areas

Investment Decision Making

SBS Thought Leadership Area Justification

This ELP project is a thought leadership project in the Investment Decision Making area. This classification is suitable, as the study deals with the evaluation of a feasibility of a major investment by using financial modeling, discounted cash flow valuation, cost of capital estimation, capital structure evaluation and risk-return analysis. The project highlights the use of operational assumptions and long-term financial planning in making strategic investment decisions in a challenging economic environment. It also considers profitability and liquidity in assessing investments in capital-intensive sectors. In general, the report offers valuable advice on the efficient structuring of investments for PSO as the company deals with oprational and financial risks.

Aligned SDGs

GOAL 8: Decent Work and Economic Growth

Aligned SDGs Justification

The project supports the United Nations SDG 8: Decent Work and Economic Growth as it generates direct and indirect jobs both in the construction and the operation of a new outlet of the PSO. It will benefit the local economy by fueling economic growth with greater fuel availability, bolster the fuel supply chain, and help local enterprises. The project will also create a safe and professional work environment and maximise operational efficiency, promoting sustainable economic growth and job creation in Pakistan.

NDA

No

Abstract

This Experiential Learning Project represents a thorough financial feasibility study for a new petrol pump outlet, XYZ Filling Station, to be developed under Pakistan State Oil (PSO) in DHA Karachi. This project has an initial capital expenditure of PKR 150 million in civil works and construction along with machinery. It has an estimated lifespan of 15 years of operation. Finacial model was prepared using an excel spreadsheet to look at the feasibility of the project.

The financial analysis incorporates macro-economic parameters such as inflation, policy rate, international crude oil prices, and exchange rates. It then develops a consolidated income statement, balance sheet, cash flow statement, and investment profile. The key results from the valuations include NPV of PKR 274.14 million, IRR of 29.23%, a Simple Payback Period of 4.32 years, and a Profitability Index of 2.83x, all of which have been compared with WACC of 15.15%.

A list of the risk register for twelve material risk categories is presented in this report, followed by an analysis of the balance sheet showing a Compound Annual Growth Rate (CAGR) of assets of 14.5%. The sensitivity control sheet is also included here to validate that the project is resilient enough to withstand any unfavourable situations.

The project needs to be accepted and is next in pipeline for PSO. This would bring economic growth and aligns with the long-term vision of PSO. The retail outlet is viable due to positive NPV and a stable IRR which will generate returns fot the company. Overall, this was a learning experience but the project as many limitations such as macro-economic instability.

Document Type

Restricted Access

Document Name for Citation

Experiential Learning Project

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