Q12.14 Finney Inc. is a construction company specializing in commercial real estate projects. Finney has contracted...

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Q12.14 Finney Inc. is a construction company specializing in commercial real estate projects. Finney has contracted with the Perry Companies to build an office building for $20 million. Finney esti- mates the construction costs will be about $16 million, with the construction taking over 2 years to complete. Due to the uncertainties with such a project, Finney requires a 14 percent return. The expected net operating income on a percentage of completion basis and distributions over the next 3 years are ($ thousand) Net project income (NOPAT) Distributions (FCF) Year 0 Year 1 Year 2 Year 3 1,500 2,100 2,400 1,500 2,100 2,400 a. b. Assume, Finney uses the percentage of completion method for recognizing revenue (i.c.. revenue is recognized each period as it earned), determine the value of the project with ADIGM. Assuming Finney uses the completed contract method for recognizing revenue (ie., all profit recognized in the final period), determine the value of the project with ADIGM. Explain whether the choice of the accounting revenue recognition policy impacts the project's value. Q12.14 Finney Inc. is a construction company specializing in commercial real estate projects. Finney has contracted with the Perry Companies to build an office building for $20 million. Finney esti- mates the construction costs will be about $16 million, with the construction taking over 2 years to complete. Due to the uncertainties with such a project, Finney requires a 14 percent return. The expected net operating income on a percentage of completion basis and distributions over the next 3 years are ($ thousand) Net project income (NOPAT) Distributions (FCF) Year 0 Year 1 Year 2 Year 3 1,500 2,100 2,400 1,500 2,100 2,400 a. b. Assume, Finney uses the percentage of completion method for recognizing revenue (i.c.. revenue is recognized each period as it earned), determine the value of the project with ADIGM. Assuming Finney uses the completed contract method for recognizing revenue (ie., all profit recognized in the final period), determine the value of the project with ADIGM. Explain whether the choice of the accounting revenue recognition policy impacts the project's value.