Optimal financial structure in investment projects

Investment projects tied to large public infrastructures have proliferated throughout the world. Services and public infrastructures are fundamental elements for the economic and social development of any territory. For this reason, the dimension that this kind of investment require, can be very significant as well as its financing needs. Nevertheless, the financial capacity of the public sector can be limited by budgetary restrictions or the fulfillment of some macroeconomic criteria. In these cases, it becomes clear the necessity of cooperation between public and private sectors in order to finance projects of this nature, materialized for example, by means of financing instruments like Project Finance. Project Finance is a financing instrument for investment projects. Cashflows generated by the project constitute the main guarantee for financing the operation, since they are the main source of income to cover financial obligations. An ad hoc company is built in order to undertake the project under consideration. This company has its own financial structure, which is highly leveraged. In this work, we present a numerical application of the multi-objective program of Barberà et al. (2005). This multi-objective program can help to determine the optimal financial structure of a project financed by means of Project Finance. In this occasion, we add an extension of Zimmermann’s Max-Min Approach, for the resolution of the program.