FINAL REPORT

On

Economic Study of the Lahore Fort Interpretation Centre –

Site Museum

Walled City of Lahore Authority (GoPb)

AGA KHAN CULTURAL SERVICES - PAKISTAN

November 25, 2022

By

SURIYA NAUMAN REHAN & CO.

Chartered Accountants

Mr. Nauman Rafique

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Table of Contents
1. INTRODUCTION...................................................................................................................................3
1.1 Economic Study...........................................................................................................................3
1.2 Strategic Context.........................................................................................................................3
1.3 Project Objectives........................................................................................................................3
2.1 METHODOLOGY...............................................................................................................................5
2.1 Economic Evaluation....................................................................................................................5
2.2 Schematic Outline........................................................................................................................5
2.3 Economic Study Parameters........................................................................................................6
2.4 Discount Factors..........................................................................................................................7
3.4 Capital Expenditure – PC 1...........................................................................................................8
4.4 Operating Cash Inflows................................................................................................................9
3.1 RESULTS.........................................................................................................................................12
1.1 Capital Expenditure...................................................................................................................12
2.1 Operating Cash flows.................................................................................................................12
3.1 Summary....................................................................................................................................14
4.1 SENSITIVITY....................................................................................................................................16
5.1 ABBREVIATIONS.............................................................................................................................20

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 1. INTRODUCTION
1.1 Economic Study
Suriya Nauman Rehan & Co, Chartered Accountants (SNRC) were engaged to conduct an
Economic Study of the Lahore Fort Interpretation Centre – Site Museum by the
Lahore Walled City of Lahore Authority (WCLA) through Aga Khan Cultural Services
Pakistan (AKCSP).

The aim of the Economic Study is to evaluate and summarize streams of Cash outflows
in the form of Capital, Revenues Expenditures and comparing with the estimated
additional revenue generation from the rehabilitated site of Museum to be established
within the ancient Lahore Fort. These cash flows are then used to determine the net
present value ("NPV"), Internal Rate of Return (“IRR”) and other key indicators
associated with the Project appraisal.

1.2 Strategic Context

The commitment to develop the Lahore Fort Interpretation Centre – Site Museum is in
accordance with a policy decision made by the GoPb in recognition of the social and
economic value to be unlocked from broadening cultural offerings across Lahore and
supporting the social and tourism opportunities in the Lahore Fort. The development of
Lahore Fort Interpretation Centre – Site Museum will serve as an anchor to the new
arts, heritage and cultural precinct in the Lahore region.

1.3 Project Objectives

In 2007, the GoPb and AKCSP began a decade-long urban conservation initiative in the
Walled City of Lahore. Following PC – I (2017 – 2021) which was approved by P & D for
a total amount of PKR 964.087 million for conservation of Lahore Fort, WCLA and
AKCSP are currently focusing on restoration of Picture wall, Summer Palace and Royal
Kitchens and establishment of the Museum.
The general objective is to contribute to tourism development through heritage
conservation, new facilities and urban regeneration in a world heritage site.
Through investments in new tourism facilities, urban rehabilitation, monument
conservation and landscaping, as well as networks improvement in both the fort and its
buffer zone, 4 specific objectives are as follows;

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  Scale up the ongoing conservation works of WCLA in the fort by supplementing
financial resources.
 Reconnect fort with walled city and upgrade outskirts.
 Provide new tourism facilities and public amenities to improve the visitor
experience.
 Stimulate local economic development and social inclusion by job creation and
skill development.

There is an expectation that Lahore Fort Interpretation Centre – Site Museum will
provide improved amenity and contribute, along with other infrastructure investments
to increasing the attractiveness of the investments, tourism and cultural activities in
order to protect this historical site.

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 2.1 METHODOLOGY
2.1 Economic Evaluation
The Discounted Value of Projected Future Cash Flows ('DCF") Study in the presence of
NPV and IRR was developed in accordance with international practices for evaluating
the economic feasibility of any capital investment. Data was provided by LWCA which
has been used for assumptions and estimations of revenue and cost for the project for
the purpose of this study. The Study evaluates economic feasibility in different scenarios
connected with risks of the project’s implementation and sustainability. The study
estimates capital and recurring cost to be compared with revenue from various sources
over an appropriate time of 20 years’ horizon.

The DCF approach is suitable to apply given the growth and changes expected under the
cash flows streams and the uncertainty of outcomes into the future. The methodology
provides useful flexibility to Study various scenarios and changes in assumptions,
important in making sound economic decisions and verifying results.

2.2 Schematic Outline

The Study structure is illustrated by the following stages:

I. Accumulation and estimation of inputs and assumptions.

II. Calculation of the projected cash flows
III. Utilization of valuations approach and incorporation of the outcome in the DCF
framework.
Figure 1 illustrates this process.

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 Figure 1 Approach to the Economic Study

Capital Cost Plans Operations and

Visitation
Maintenance
PC - I Forecasts
Expenses

Economic Consultation &

Assumptions
Forecasts Research

Projected Cash
NPV & IRR
Flows

2.3 Economic Study Parameters

A range of timing, cost and escalation assumptions were adopted to undertake the
Economic analysis. These assumptions are summarized in the table below.

Table 1 Economic Study Assumptions

Input Variable Assumption Source

Base Date for NPV 30 June, 2022 Base assumption
Cash Flows Timing Annual Base assumption
Timing of Cash Flows End of Fiscal Year e.g. 30 June Base assumption
Project Period of 20 Years Base assumption
evaluation
Auxiliary Areas 32% of the Museum visitor Hypothesis for Income
Occupancy Generation Document by
AKCSP
Café Occupancy ratio 12% of the Auxiliary areas Base assumption
Café Revenues  Tea Price @ PKR 40 Base assumption
 Coffee Price @ PKR 100
 Other Drinks @ PKR 60
Footfall increase Y6: 150% Hypothesis for Income
Y7: 110% Generation Document by
Y8: 105% AKCSP
Y9: 100%
Y10 and so on : 95%
Museum Visiting ratio 56% of the footfall at Lahore Fort Hypothesis for Income
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 Generation Document by
AKCSP
Foreigners Visiting ratio 1% of the footfall Base assumption
Photo Point  Photo Point Occupancy @ 1% of Base assumption
Museum visitors
 Charge Per Photo @ PKR 30 per shot
per person
CAPEX Completion FY 2023: 10% Base assumption
FY 2024: 20%
FY 2025: 20%
FY 2026: 20%
FY 2027: 30%
Operational Inflows FY 2028 (Year 6 after establishment of Base assumption
Timing the Museum)
Capital Expenditure CAPEX PC - I
Outflows
Operational & Operational Expenses Operations and Maintenance
Maintenance outflows Cost Schedule by AKCSP.
Inflation  10% on annual rent and 5% on other Base assumption
operational cash flows

The appropriate evaluation period determinant for the Interpretation Site Museum
should be the asset’s economic life. However, for long-lived assets, it is assumed that
the operating term is restricted to 20 years and then estimating the asset's residual
value to represent the remaining service potential.

This methodology recognizes that after a period of 20 years, the analysis will be
relatively insensitive to the choice of a longer payback due to the discounting of future
cash flows. It also recognizes the difficulty of forecasting cash flows over such long
periods.

2.4 Discount Factors

To assess and compare estimated project cash flow and options, all the cash flows
streams were discounted by the 10 Years Weighted Average Yield (WAY) of PIB’s. This
represents the expected financial rate of the return that the investor would require in
order to supply the investments or capital in the marketable securities.

As the implementing agencies do not hold any debt that is to be paid by the GoPb to the
Lender (AFD) and instead receive all the CAPEX Cash inflows as Government Grants by

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 the GoPb. They are in fact 100% equity financed rendering it as risk free. Therefore, the
only component that Lahore Fort Interpretation Centre – Site Museum needs to be
calculated is the Ke.

The investment guidelines stipulate that the most appropriate risk free rate of the
return for the Government Projects funded by the donations or the grants by the
Government itself is the WAY of 10% PIB’s. In order to smooth, CAPEX and Operational
cash flows volatility, both WAY of 10 years, Coupon rate of 15 years and 20/30 years
PIB’s were used as DF in the Economic Study. These rates were 13.0325%, 11.00% and
10.50% on June 23, 2022.

3.4 Capital Expenditure – PC 1

Capital expenditure and construction cost estimates were developed by the Planning
Commission of the Government of Pakistan and they are referred as PC – I and
summarized below;

Details is accessed at Appendix to the Report

Table 2 Capital Expenditure - PC 1
S.No Description PKR Amount Component
I. Exhibition Area 249,024,224 A
II. Auditorium 75,812,646 B
III. Corridor Area 48,626,415 C
IV. Curator’s House 31,047,796 D
V. Furniture, Fixtures and 34,121,500 E
Equipment’s
Total 438,632,581

This capital cost is expected to incur over a time horizon of the five years and it is
expected that the Museum would be completed and finished in Year 6 and would be
open for the public in the Year 6 of the evaluation period. The following diagram shows
how this capital expenditure would be consumed over 5 year’s period.

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 Figure 2 Completion Stages of CAPEX

PC 1 Cost
Exhibition Area Auditorium Corridor Area
Curator House Furnitures & Equipments
80

70

60

50

40

30

20

10

0
Year 1 Year 2 Year 3 Year 4 Year 5

In addition to the investments in construction and infrastructure cost of the Museum, it

is recognized that there may be the cost associated with acquisition of the land.
Similarly, the development of the Museum will enable divestment and potential
development of the current site of the Lahore Fort to make it more attractive and
renovated for the public and tourists. However, the value of acquisition and divestment
of the land is excluded from this Economic Study because this land is already owned by
the Government and there would be no clause’s that would otherwise require it to be
incurred to restore the site in form of divestment.

4.4 Operating Cash Inflows

AKCSP (The Ancillary Implementing Agency) conducted a survey on the expected
number of the footfall that would visit the Museum when the new Museum would be
established and completed in all respects rendering it as open for the public. The survey
states that 56% of the footfall or the visitors entering the Lahore Fort would like to visit
the Museum. Raw data of the footfall is given from 2016 to 2019, however data in
subsequent years could not be available due to COIVD -19 Pandemic and SOP’s imposed
the Lahore Fort was unavailable for the public. Therefore, on advice from the Ancillary
Implementing Agency, this footfall is expected to increase at the ratio of 150%. This

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 ratio of 150% is too optimistic in subsequent years as the Museum gets older.
Accordingly, this ratio of 150% is revised downwards to 95% in Year 10 and
subsequent years to adjust the base assumption and make it more appropriate given the
constraints operations.
The followings major revenue streams were included in the Economic Study;
 Admissions revenue/Entry Price (Excluding those related to the exhibition or
display area).
 Café usage
 Shops rent
 Conference area/venue hire

Admission revenue was modeled on a per visitor basis and there are three main type of
the visitors classified by the Ancillary Implementing Agency (AKCSP) rendering them as
Adult, Student and Foreigners and the admission revenuer or the entry price is different
for each classification ranging from PKR 50, PKR 30 and PKR 500 respectively. This
classification is further grouped into the “Revenue from Local Visitors” (Both adults
and students) and “Revenue from Foreign visitors” as illustrated below;

See Appendix to the Report for details

Table 3 per Visitor Admission Revenue Calculation
% Total Revenue Total Revenue
S. No Years Visitors Occupancy Local Visitors Foreign Visitors
Y6 2028 5,925,000 3,318,000 132,720,000 29,625,000
Y7 2029 6,517,500 3,649,800 145,992,000 32,587,500
Y8 2030 6,843,375 3,832,290 153,291,600 34,216,875
Y9 2031 6,843,375 3,832,290 153,291,600 34,216,875
Y10 2032 6,501,206 3,640,676 145,627,020 32,506,031
Y11 2033 6,176,146 3,458,642 138,345,669 30,880,730
Y12 2034 5,867,339 3,285,710 131,428,386 29,336,693
Y13 2035 5,573,972 3,121,424 124,856,966 27,869,859
Y14 2036 5,295,273 2,965,353 118,614,118 26,476,366
Y15 2037 5,030,509 2,817,085 112,683,412 25,152,547
Y16 2038 4,778,984 2,676,231 107,049,241 23,894,920
Y17 2039 4,540,035 2,542,419 101,696,779 22,700,174
Y18 2040 4,313,033 2,415,299 96,611,940 21,565,165
Y19 2041 4,097,381 2,294,534 91,781,343 20,486,907
Y20 2042 3,892,512 2,179,807 87,192,276 19,462,562

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 Revenue from the local visitors is calculated on the footfall expectation by taking the
average price of both adults and students which is PKR 40 on the base assumptions of
the 56% visitation from the total 100% footfall in the Lahore Entrance. The revenues
are inflated for the NPV and IRR purpose by escalating the projected inflation rate based
on 5% annually.

The average admission or the entry price taken is the current charge being collected
from the visitors and no separate charge or premium is added for museum visits to
analyze the effect of sensitivity of the operating cash inflows at the worst case scenario.

Similarly, the foreign visitors the visiting frequency is assessed at 1% taking it as base
assumption and charge is PKR 500 for each foreign visitor visit and this effect is
included in the NPV calculation by inflating to the expected rate of the inflation.

Revenue from the café usage represents another part of the revenue streams as
illustrated in the appendix to the report. This table illustrates the revenue calculation
based on the occupancy of the visitor at 12% of the total auxiliary area taking it as base
assumptions and then estimated tea, coffee and other drink prices is applied.

Rent collection from the souvenir, Book and other similar shops is estimated based on
the mapped area of these shops. The results of these collections are included in the
Economic Study by assuming the PKR 300 Square feet per month and then inflating at
10% taking it as base assumption.

Museum is mapped with the conference or the venue area which can be used as an
additional source of the revenue and there is appropriate probability that this venue
hire is likely to increase as a result of the establishment of the Museum which would be
attractive to the users. The NPV calculations shows the effects of this conference
revenue assuming the PKR 300 Square feet per month and then inflating at 10% taking
it as base assumption.

The appendix to the report represents the other revenues which are although minimal
to any economic decisions however, they are incorporated into the NPV and IRR
calculation.

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 3.1 RESULTS
1.1 Capital Expenditure
The Capital component of the project covers PC – 1 cost as illustrated below;
 Construction cost
 Contractor payments
 Investments in
o Supporting project systems
o Installation of electrical and digitalization equipment’s

The table 4 illustrates Nominal and PV of the capital cost. It shows the pattern over
which the capital expenditure behaves with the varying discount rates used. However,
these CAPEX are not inflated.

Table 4 Capital Expenditure Results

DF NV PV
13.025% 439 millions 289.6 millions
11.00% 439 millions 307.5 millions
10.50% 439 millions 312.2 millions

The Capital Expenditure are forecasted by the Planning Commission of Pakistan,

although there are the probabilities of variation in the PC – 1 approved. Accordingly, the
Economic Study assumes this PC – 1 cost is not subject to variations and would remain
consistent over the establishment horizon. However, the Sensitivity section of this
report further illustrates how the NPV would behave if there are the certain variations
in the CAPEX or PC – I. (Refer to the Sensitivity for the further analysis)

2.1 Operating Cash flows

The operating cash flows summaries the net effect (Surplus or deficit) of the operating
cash inflows and outflows and are forecasted over the project delivery phase, and
mainly includes the followings;

 Revenues from;
o Admission or Entry fee
o Café use
o Conference area
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 o Rent collection etc
 Expenses in;
o Generator fuel cost
o Repair & maintenance
o Staff salaries
o General overheads

These operating cash flows (Inflows and outflows) are incorporated based on the best
estimates (See Table 1 Economic study assumptions) and escalated over the evaluation period of
20 years rendering them as base assumption. These cash flows are then inflated using
the 5% estimated inflation rate.

Table 5 illustrates the net results of these operating cash flows for each year with
negative results indicating a net cost to the implementing agencies.

Table 5 Net Operating Cash Flows Results

DF NV PV
13.025% 4.42 billion 999.78 million
11.00% 4.42 billion 1.22 billion
10.50% 4.42 billion 1.29 billion

The table represents the lowest PV of PKR 999.78 million at 13.025% DF however
seems a little more positive with the direct reduction in the DF. This table doesn’t show
the sufficient marginal revenue increases to support the additional operating cost
associated with the increased fixed cost and other general overheads as the number of
the visitors or the revenues are expected to be lower in the subsequent years. (Refer to the
Sensitivity for the further analysis)

Figure 3 illustrates the net operating position over the evaluation period of twenty
years showing the multiple pattern at the different DF.

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 Figure 3 Net Operating Cash Flows Trends

Trend Analysis
140.000 Million

120.000 Million

100.000 Million

80.000 Million

60.000 Million

40.000 Million

20.000 Million

.000 Million
Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

DF @ 13.025% DF @ 11.00% DF @ 10.50%

3.1 Summary
Table 6 Overall Economic Study Summary
Refer to the Appendix to the Report for details calculation
DF NPV
13.025% 582.8 million
11.00% 776.3 million
10.50% 833.3 million

The museum generates positive cash flows indicating positive NPV at different discount
factors. The cash flows are assessed over the period of twenty years. The initial
investment in the form of PC – I is expected to recover over the next two years (Year 6
to Year 7) having the NV of PKR 224.88 million in year 6, and PKR 260.8 million in year
7 which indicates that the project would be able to generate the accumulated positive
cash flows in year 7 rendering it feasible based on the underlying assumptions. It might
be possible that these assumptions don’t hold true and the payback period and NPV may
be subject to the variation. (Refer to the sensitivity analysis for further details) . It is evident from the
Table 6 that NPV would move in reverse relation with the DF, the higher the discount
rates are used, the lower the NPV. Given this trend, the NPV still generates positive cash
flows at a higher discount rate of 13.025%. Further, Economic study highlights an IRR

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 33% which renders the project sustainable in the given underlying assumptions. (Refer to
the Economic Study Parameters: Table 1 for further details).

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 4.1 SENSITIVITY
This Economic Study is based on underlying assumptions which are subject to the
uncertainty and risk associated with the project. The assumption may vary with passage
of time and market situation. This sensitivity analysis will help to make the economic
decisions based on the varying conditions and circumstances to deal with scenario
planning as relying on the single outcome may not materialize. Therefore, it is necessary
to assess the economics of the project from varying perspectives and changing
assumptions to assess how it behaves and whether or not the project is capable of long
term sustainability.

In this Economic Study, the main areas of uncertainty relates to the followings key
assumptions;

 The visitation/footfall forecast

 Change in admission or entry fee
 Café usage
 Rent collection
 CAPEX estimation
 Operating and other general overheads forecast

The percentage changes were applied to test the efficiency of covering the cost over a
payback period of two years. This percentage is applied from three different
perspectives of increase, decrease and no change over the varying discount factors. This
test is illustrated below; (Refer to the appendix to the report for the detailed analysis).

Table 7 Footfall Sensitivity Results

DF @ 13.0325% DF @ 11.00% DF @ 10.50%

Variations PV NPV % PV NPV % PV NPV %
Of Net Change Of Net Change Of Net Change
Cash Cash Cash
flows flows flows
PKR PKR PKR PKR PKR PKR
Reduce by 15% 442 m 122 m 79% 523 m 180 m 77% 545 m 197 m 76%
  
Reduce by 10% 568 m 227 m 61% 679 m 314 m 60% 710 m 339 m 59%
  
Reduce by 5% 745 m 374 m 36% 902 m 503 m 35% 946 m 541 m 35%

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   
No Change .99 b 582 m 1.22 b 776 m 1.29 b 833 m
Increase by 15% 2757 m 1997 m 243% 3532 m 2668 m 192% 3760 m 2896 m 248%
  
Increase by 10% 1925 m 1331 m 129% 2431 m 1779 m 129% 2578 m 1912 m 130%
  
Increase by 5% 1371 m 885 m 52% 1707 m 1178 m 52% 1804 m 1264 m 52%
  

Table 7 presents the results of the footfall variation sensitivity. Under this sensitivity,
the annual number of the visitors was altered over the project life, to determine the
effect of footfall levels above or below the projection.

The table highlights the percentage % change from 5% to 15% to lead to the variation in
the NPV which means the footfall change or change in projection is sensitive to the NPV.
Accordingly, IRR would be 29%, 25% and 21% when the footfall is reduced by 5%, 10%
and 15% respectively. Similarly, the IRR would be 37%, 41% and 45% when the footfall
is increased by 5%, 10% and 15% respectively.

Table 8 Admission/Entry Price Sensitivity Results

DF @ 13.0325% DF @ 11.00% DF @ 10.50%

Variations PV NPV % PV NPV % PV NPV %
Of Net Change Of Net Change Of Net Change
Cash Cash Cash
flows flows flows
PKR PKR PKR PKR PKR PKR
Reduce by 15% 638 m 283 m 51% 773 m 391 m 50% 811 m 422 m 49%
  
Reduce by 10% 674 m 313 m 46% 816 m 428 m 45% 856 m 462 m 45%
  
Reduce by 5% 710 m 344 m 32% 859 m 466 m 40% 901 m 501 m 40%
  
No Change .99 b 582 m 1.22 b 776 m 1.29 b 833 m
Increase by 15% 852 m 465 m 20% 1031 m 615 m 21% 1082 m 659 m 21%
  
Increase by 10% 816 m 435 m 25% 988 m 578 m 26% 1037 m 620 m 26%
  
Increase by 5% 781 m 404 m 31% 945 m 541 m 30% 991 m 580 m 30%
  

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 Table 8 shows how different patterns of NPV are reported with corresponding change in
the admission or the entry price. Currently, no separate charge or premium is added to
the current admission price. However, if the premium is added by 5% to 15% the NPV
would result in a positive change of……………………. Thus, the admission price is another
variable which may lead to the changes in the NPV and economic decisions of the
implementing agencies.

IRR would be 28%, 27% and 26% when admission/entry fee is reduced by 5%, 10%
and 15% respectively. Similarly, the IRR would be 30%, 31% and 32% when the
admission/entry fee is increased by 5%, 10% and 15% respectively.

Table 9 Cafe Usage Sensitivity Results

DF @ 13.0325% DF @ 11.00% DF @ 10.50%

Variations PV NPV % PV NPV % PV NPV %
Of Net Change Of Net Change Of Net Change
Cash Cash Cash
flows flows flows
PKR PKR PKR PKR PKR PKR
Reduce by 15% 740 m 370 m 36% 895 m 498 m 36% 940 m 535 m 36%
  
Reduce by 10% 742 m 371 m 36% 897 m 499 m 36% 942 m 537 m 36%
  
Reduce by 5% 743 m 373 m 36% 900 m 501 m 35% 944 m 539 m 35%
  
No Change .99 b 582 m 1.22 b 776 m 1.29 b 833 m
Increase by 15% 750 m 379 m 35% 908 m 509 m 34% 953 m 547 m 34%
  
Increase by 10% 749 m 377 m 35% 906 m 507 m 35% 951 m 545 m 35%
  
Increase by 5% 747 m 376 m 35% 904 m 505 m 35% 948 m 543 m 35%
  

Revenue from the café use is another variable that is sensitive to the changes in NPV.
Table 9 illustrates the results of this sensitivity pattern over the NPV of the project
assuming that only the occupancy would be varied, however, the estimated price would
remain the same.

IRR would be constant at 29% when occupancy or usage is reduced or increased by 5%,
10% and 15% respectively.

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Table 10 Rent Collection Sensitivity Results

DF @ 13.0325% DF @ 11.00% DF @ 10.50%

Variations PV NPV % PV NPV % PV NPV %
Of Net Change Of Net Change Of Net Change
Cash Cash Cash
flows flows flows
PKR PKR PKR PKR PKR PKR
Reduce by 15% 735 m 366 m 37% 889 m 492 m 37% 933 m 530 m 36%
  
Reduce by 10% 739 m 369 m 37% 893 m 496 m 36% 937 m 533 m 36%
  
Reduce by 5% 742 m 371 m 36% 898 m 500 m 36% 942 m 537 m 36%
  
No Change .99 b 582 m 1.22 b 776 m 1.29 b 833 m
Increase by 15% 755 m 382 m 34% 914 m 514 m 34% 959 m 552 m 34%
  
Increase by 10% 752 m 380 m 35% 910 m 510 m 34% 955 m 548 m 34%
  
Increase by 5% 748 m 377 m 35% 906 m 507 m 35% 951 m 545 m 35%
  

Average estimated revenue @ PKR 300 is taken for the Economic Study analysis.
However, NPV is sensitive to the variation in the estimated rent collection. Table 10
depicts how the NPV behaves with the changes in rent collection by 5% to 15% the NPV
would result in positive change of…………………….

IRR would be constant at 29% when average estimated rent collection is reduced or
increased by 5%, 10% and 15% respectively.

Table 11 CAPEX Sensitivity Results

DF @ 13.0325% DF @ 11.00% DF @ 10.50%

Variations PV NPV % PV NPV % PV NPV %
Change Change Change
PKR PKR PKR PKR PKR PKR
Reduce by 15% 246 m 413 m 29% 261 m 545 m 30% 265 m 584 m 30%
  
Reduce by 10% 260 m 400 m 31% 276 m 531 m 32% 281 m 569 m 32%
  
Reduce by 5% 275 m 387 m 34% 292 m 517 m 33% 296 m 555 m 33%
  
No Change 582 m 776 m 833 m
Increase by 15% 332 m 335 m 42% 353 m 461 m 41% 358 m 498 m 40%
  
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Increase by 10% 318 m 348 m 40% 338 m 475 m 39% 343 m 512 m 39%
  
Increase by 5% 304 m 361 m 38% 322 m 489 m 37% 327 m 527 m 37%
  

Capital expenditures are taken as were approved by the Planning Commission of

Pakistan. These CAPEX are amortized over an initial period of 5 years and are not
inflated by the general inflation rate. These CAPEX are the major cash outflows and any
variation in these cash flows can make the NPV positive or negative depending on the
nature of the variation. Therefore, it is necessary to test how NPV would behave with
the upward and downward movement in these cash flows. Table 11 illustrates that NPV
would…………. Where these cash flows are incurred by 15% more than the projection
included in the study. Similarly, the NPV would reduce from……………. Indicating the
reduction of …………. When there is upward movement by ……………. And ………………..

IRR would be 30%, 32% and 33% when CAPEX is reduced by 5%, 10% and 15%
respectively. Similarly, the IRR would be 28%, 27% and 26% when CAPEX is increased
by 5%, 10% and 15% respectively.

5.1 ABBREVIATIONS
Following abbreviations are used in this Economic Study.

S.No Abbreviations Description

I. NPV Net Present Value
II. WCLA Walled City of Lahore Authority
III. AKCSP Aga Khan Cultural Services Pakistan
IV. GoPb Government of Punjab
V. DCF Discounted Cash Flows
VI. CPI Consumer Price Index
VII. DF Discount Factor
VIII. AFD Agency for Development
IX. PIB’s Pakistan Investment Bonds
X. WAY Weighted Average Yield
XI. Ke Cost of Equity
XII. NV Nominal Value
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 XIII. PV Present Value

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