The government of Cyprus has invited for tenders for the construction of a new highway between Paphos and Polis on a BOT basis. According to the invitation:

a.The government will transfer to the successful bidder the land for free.

b.The cost of construction will be 400m payable as follows:

10% immediately,

40% at the end of the first year and

50% by the end of the second year.

c.The first net cash inflows from the use of the highway will start in year three. These net cash inflows will increase by 4% annually.

The Board of Directors of KAPPA PLC is preparing its offer to the government. Its most recent Balance sheet is shown below: