9/11/2015

NationalRailPassengerCorporation(Amtrak):AcelaFinancing

National Rail Passenger Corporation

(Amtrak): Acela Financing
* Required

What are the Opportunities for Amtrak?

Expandintoareasnotcoveredbytheirexistingstrategicbusiness
units.
Usethe"Acela"modelinotherareas.
Expandintofreightbusiness.

Why Federal Govt has not decided to stop the Govt. funding for Capital Expenditure?
Thisisbecausecapitalexpenditureresultsinthecreationofanasset
andcanbecapitalized.Capitalexpenditureisnotanexpense.

Why the Federal Govt. has decided not to provide federal funds for operating expenses from
2002 onwards?
Amtracisalossmakingagency.Anyfundsspentonexpenseswill
directlygotolossesandcanneverbecapitalized.

What is the passenger related revenue to total revenues? (State in %)

74.48%

What is the Commuter revenue to total revenues? (State in %)

13.44%

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NationalRailPassengerCorporation(Amtrak):AcelaFinancing

SecB>G15108>SamudraKallolMukherji

As an Investor of Amtrak, What will be your inference on negative Netwroth?

Thisisanentitythathaslivedit'sentirelifeongovernmentfunds.
Withoutthegovernmentbackingitupitwillnotbeabletofunditself.
GiventheGovernment'sdecisionnottofundOPEXIwillneverever
investinAmtrak.ThegoalofAmtrakistoproviderailwayserviceand
probablyemploymentnotreturnsforinvestors.

Whats is the SD of market-value fluctuations of train sets and locomotives?

25%

Why US Federal Govt. was providing subsidy for the company Amtrak?
Amtrakisthenationalcarrierwasthelargestproviderofpassengerrail
serviceintheUS.

What are the strengths of Amtrak?

ThevastrailwaynetworkintheeastUS,westUSandcentreofthe
country.

How EDS can protect itself, while lending to BNY Capital Funding?
Ithasthefirstclaimonleasepayments.

What is the projected annual revenue from Acela Project?

$180million

What is the total estimated cost of Acela Equipments?

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NationalRailPassengerCorporation(Amtrak):AcelaFinancing

$750,000.050

What is the growth in total expenses from 1994 to 1998 for Amtrak?
17.453%

What is the cost of Train Sets?

Total32,129,050

What is the biggest Federa Grant for Amtrak?

Federaloperatinggrant

What are the Threat for Amtrak?

Ifpeoplepreferflightstotrainsthenthedemandfortrainswillgreatly
fall.

What are the terms of Borrow and Buy as stated in the case?
Moneywasborrowedtofundpartofthepurchaseofassets,pledging
theleasecontractassecurityfortheloan.

What are the strategic business units of Amtrak?

AmtrakNortheastCorridor
AmtrakIntercity
AmtrakWest

What are the types of equipment ot be purchased for the Acela Project?

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NationalRailPassengerCorporation(Amtrak):AcelaFinancing

15dualcabhighhorsepowerelectricHighspeedlocomotives
20highspeedtrainsets(eachtrainsethas1firstclasscoachcar,1
bistrocar,3coachcar,1endcoachcar,2powercars)

What is the Reimbursal revenue to total revenues? (State in %)

5.62%

Select the three biggest expenses for Amtrak

Advertising and sales
Facility and office related
Depreciation and amortization
Maintenance-of-way goods and services
Train operations
Salaries, wage and benefits
Interest

Will Federal Govt stop the Govt. funding for Capital Expenditure in the future? Why?
Difficulttopredict.
LikelyifAmtrakcannotbecomeaselfsustainingfirminthenearfuture.

How is deprectaion estimated on Acela equipments for Accounting and Tax Purposes?
Straightlinedepreciationforaccountingpurposes.
SevenyearsModifiedAcceleratedCostRecoveryfortaxpurposes.

What is the 17-year risk-free rate?

5.78

When Acela is expected to start its service?

1999
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NationalRailPassengerCorporation(Amtrak):AcelaFinancing

Case Dated?
04/30/1999
What is the Federal Payments revenue to total revenues? (State in %)
6.43%

What are the Weaknesses of Amtrak?

1.HugeliabilitiestoFederalGovernment
2.Lotofbusinessrisk,especiallyifAcelaflops.

What is the estimated resdiual value of Acela equipment?

$112,500,075

What is the amount of financing to be arranged now for financing Acela Equipment?
$750,000,500

Rank the Amtrak's assets from largest to smallest (Sept 30, 1998)
1

Materials and
supplies
Other assets and
deferred charges
Cash and
equivalents
Other current
assets
Account
receivable, net
Net property,
plant and
equipment
Temporary cash
investments

What is the cost of high speed locomotives?

Total$107,419,500

What is Amtrak's WACC?

11.8

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What is the estimated life of Acela equipment?

25years

What Acela is expected to offer to the customers of Amtrak?

1.Premiumservice
2.Reductionintravellingtime
3.Comfortableseats
4.Upscalebusinessamenities
5.Musicandgourmetfood
6.Entertainmentthroughoutthejourney(cafeetc)

What is the role of Wilimington Trust in Leveraged Lease?

ItistheownertrusteeandsitsbetweenAmtrakandEquityInvestor
(BNYCapitalFundingLLC)andLender(EDC).Theequityanddebt
fundsonclosingflowthroughWilmingtonTrustanditalsodistributes
therentalpaymentbetweenEDCandBNYCF.

What would have caused Amtrak to be in loss for 30 years?

Lowoperatingefficiency.
Poorrouteselection.Someroutesareprofitablebutsomearenot.

Will these equipment be has higher chance of becoming technological absolesence?

Yes
No

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