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Financing the Eiffel Tower: Project Finance and Agency Theory

Minggu, 22 Mei 2011 | 1 Comment | Labels :

In the mid-1880s, wishing to celebrate the 100* anniversary of the French revolution, the French Republic planned an 1889 exposition intended to promote French knowledge and industry. The French engineer, Gustave Eifïel, suggested to Edouard Lockroy, then the Minister
of Commerce and Industry and Fair Commissar, building what would become the world's highest tower as an entrance gate to the Fair. The tower was to be constructed of metal structural engineering members like the famous Garabit viaduct or New York City's Statue of Liberty. Eiffel succeeded in convincing Lockroy that such an editice would be proof of France's industrial design ability.
A Request for Proposals (RFP) was issued on May 1.1886, requiring all responses to be filed within a mere two weeks. Tbe press and various selection committee members noted at the time that this rather clearly gave the edge to EitTel over other prospective bidders. And, unsurprisingly, Eiffel won the bid. Unable to afford complete financing ofa 6.5 million French franc project (in 1889 terms), the govemment decided to offer a 1.5 million franc subsidy for the project, with the balance to be funded by the private operator and reimbursed by operating revenues attributable to the tower during the World Fair and for twenty years after' Gustave
Eiffel developed an innovative financial scheme to carry out his Eiffel Tower financing.

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