Developing Viable Financing Models for Space Tourism

Details Developing Viable Financing Models for Space Tourism Developing Viable Financing Models for Space Tourism

Jan 2002

adsabs.harvard.edu/cgi-bin/nph-data_query?bibcode=2002iaf..confe.266e&link_type=abstract

IAF abstracts, 34th COSPAR Scientific Assembly, The Second World Space Congress, held 10-19 October, 2002 in Houston, TX, USA.,

Computer Science

Performance

Scientific paper

Increasing commercialization of space services and the impending release of government's control of space access promise to make space ventures more attractive. Still, many investors shy away from going into the space tourism market as long as they do not feel secure that their return expectations will be met. First and foremost, attracting investors from the capital markets requires qualifying financing models. Based on earlier research on the cost of capital for space tourism, this paper gives a brief run-through of commercial, technical and financial due diligence aspects. After that, a closer look is taken at different valuation techniques as well as alternative ways of streamlining financials. Experience from earlier ventures has shown that the high cost of capital represents a significant challenge. Thus, the sophistication and professionalism of business plans and financial models needs to be very high. Special emphasis is given to the optimization of the debt-to-equity ratio over time. The different roles of equity and debt over a venture's life cycle are explained. Based on the latter, guidelines for the design of an optimized loan structure are given. These are then applied to simulating the financial performance of a typical space tourism venture over time, including the calculation of Weighted Average Cost of Capital (WACC) and Net Present Value (NPV). Based on a concluding sensitivity analysis, the lessons learned are presented. If applied properly, these will help to make space tourism economically viable.

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