Reference no: EM132893343

Please help me answer this critical thinking question, this is about Project Finance.

Mr. A wanted to put up a lucrative business. To his estimate, the said business requires him to raise PhP 1.0 Billion pesos. After series of representations, many investors showed interest to join and pour in capital under the tenor of project finance. One of them is Mr. B who shell out PhP500 million. Mr. A set up this loan as a loan with no recourse from which Mr. B showed no objection. Finally, the project was realized. After the lapsed of 10 years, the project earned so much profit. Seeing this as an opportunity, Mr. A ask Mr. B to simply foreclose the collateral which at present has an assess value of PhP 500 million.

Question: Assuming the lender manifested no resistance, was the proposal of Mr. A correct under the tenor of project finance? Is it correct or wrong? Support your answer with reasons and explanations.

Note: (Please begin your answer with the word CORRECT, or, WRONG. Then support your answer with reason(s). Maximum of thirty words.