CFA Level I · CFA Level I Exam · Real Estate and Infrastructure
Compared with an operating (brownfield) infrastructure asset, a greenfield infrastructure project most likely exhibits:
Greenfield projects most likely offer higher potential returns but with greater uncertainty. They involve building new assets, so investors face construction, regulatory and demand risks and little early cash flow. Brownfield assets are already operating and generally provide steadier, more predictable cash flows with lower risk.
- Alower construction and development risk
- Bstable, predictable cash flows from the outset
- Chigher potential returns but greater uncertaintyCorrect
Explanation
Greenfield projects involve new construction, so they bear construction, permitting and demand-ramp-up risk, with no initial cash flows. In exchange they offer higher potential returns. Brownfield assets already generate relatively stable cash flows.
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