Assessing relative importance

Based on the PSC, the total nominal cost of construction of the Hospital Facilities at the end of the construction period is approximately $116m.  Assuming an economic life of 40 years based on the tax depreciation of buildings, the written down value at the end of the Project term is estimated at $44m [$116m -(($116m/40) x 25)] assuming straight line depreciation. Using the estimated Project Rate of 8.58 per cent, the estimated present value of the written down value is approximately $3.7m which represents around 3.2 per cent of the nominal capital cost of the Hospital Facilities.

Given that the estimated residual value of the facility is not a materially large proportion of the capital cost of the Project the relative importance of this risk compared to the other Systematic Risks is considered to be very low.