FOR MANAGERIAL FINANCE PLEASE IF ANYONE CAN HELP ME OUT WITH PROJECT IT'S LITTLE CONFUSING. PLEASE IF ANYONE CAN HELP ME OUT WITH THE QUESTIONS AND FOLLOW THE PROMPT PROVIDED IN THE PICTURE THAT WOULD BE REALLY APPRECIATED. THANK YOU!!
The final project is designed for students to apply the theories (capital budgeting analysis) of Managerial Finance in the rental business. The final project includes two parts. The first part is individual project, which stands for 9 points of the total grade (100 points). The second part is the group project, which stands for 10 pints of the total grade (100 points). Together, the final project represents 19 points out of 100 points of the total grade in this class. Failing to do the individual project may result in zero points in the final project. For individual project, each student is REQUIRED to select a rental property from the potential real estate properties in the U.S.for capital budgeting analysis. Please explain why you select this real estate property, rather than others. Please analyze your individual project as if you are an investment professional trying to maximize the return on your investment in the rental property. In other words, you are trying to find the investment project with highest NPV and IRR, and shortest payback period. For group project, each group member brings his/her finished individual project for discussion. The group members discuss the pros and cons of each project and select the best project as the group project for further analysis. Around the end of the semester, the final project will be evaluated based on the quality of the analyses from 1) excel sheet (e.g., projected cash flow streams, assumptions, NPV/IRR/Payback calculations, etc), 2) PowerPoint slides (no more than 10 pages), and 3) a brief written report (no more than 2 pages). Constraints/Rules for your final project analysis The analysis should base on real rental/residential houses/apartments, not hypothetical ones. Assume you just graduate from Geneseo, and your after-tax disposable income is $6,000 a year, or $500 a month. Assume you do not have any asset and debt (i.e., student loan) upon graduation Assume minimum down payment is 20% of the rental property, which can be borrowed from your parents and they charge zero percent interest. Assume the remaining 80% is borrowed from the bank. Sources of real estate information www.realtor.com www.zillow.com Suggested structure for your individual/group final project 1. Describe the selected rental house(s), and explain why? Choose a few potential rental houses for comparisons Select one from these potential rental houses for capital budgeting analysis Describe the features of this rental house Explain reasons why you select this/these rental house(s), not others 2. Projected cash inflows and cash outflows Consider all of the items regarding revenues (i.e., rent), expenses (i.e., mortgage), and potential issues/costs (i.e., roof replacement, tenants move out) of the rental business. If needed, you can make assumptions on these items. 3. Calculate the project's NPV, IRR, and Payback. NPV What is the discount rate used to calculate NPV, and why? . In real estate, we can assume 10%-15% as the discount rate The number of years used to calculate NPV should match the number of years of your mortgage IRR The number of years used to calculate IRR should match the number of years of your mortgage Payback 4. How long does it take to save enough for the down payment? 5. How long will it take to fully own the rental house? 6. What are the potential issues (factors) that may affect your capital budgeting analysis ? 7. What are the most important revenue/expense items for rental business? 8. Conclusion, lesson learned, implication, etc. . 2 The final project is designed for students to apply the theories (capital budgeting analysis) of Managerial Finance in the rental business. The final project includes two parts. The first part is individual project, which stands for 9 points of the total grade (100 points). The second part is the group project, which stands for 10 pints of the total grade (100 points). Together, the final project represents 19 points out of 100 points of the total grade in this class. Failing to do the individual project may result in zero points in the final project. For individual project, each student is REQUIRED to select a rental property from the potential real estate properties in the U.S.for capital budgeting analysis. Please explain why you select this real estate property, rather than others. Please analyze your individual project as if you are an investment professional trying to maximize the return on your investment in the rental property. In other words, you are trying to find the investment project with highest NPV and IRR, and shortest payback period. For group project, each group member brings his/her finished individual project for discussion. The group members discuss the pros and cons of each project and select the best project as the group project for further analysis. Around the end of the semester, the final project will be evaluated based on the quality of the analyses from 1) excel sheet (e.g., projected cash flow streams, assumptions, NPV/IRR/Payback calculations, etc), 2) PowerPoint slides (no more than 10 pages), and 3) a brief written report (no more than 2 pages). Constraints/Rules for your final project analysis The analysis should base on real rental/residential houses/apartments, not hypothetical ones. Assume you just graduate from Geneseo, and your after-tax disposable income is $6,000 a year, or $500 a month. Assume you do not have any asset and debt (i.e., student loan) upon graduation Assume minimum down payment is 20% of the rental property, which can be borrowed from your parents and they charge zero percent interest. Assume the remaining 80% is borrowed from the bank. Sources of real estate information www.realtor.com www.zillow.com Suggested structure for your individual/group final project 1. Describe the selected rental house(s), and explain why? Choose a few potential rental houses for comparisons Select one from these potential rental houses for capital budgeting analysis Describe the features of this rental house Explain reasons why you select this/these rental house(s), not others 2. Projected cash inflows and cash outflows Consider all of the items regarding revenues (i.e., rent), expenses (i.e., mortgage), and potential issues/costs (i.e., roof replacement, tenants move out) of the rental business. If needed, you can make assumptions on these items. 3. Calculate the project's NPV, IRR, and Payback. NPV What is the discount rate used to calculate NPV, and why? . In real estate, we can assume 10%-15% as the discount rate The number of years used to calculate NPV should match the number of years of your mortgage IRR The number of years used to calculate IRR should match the number of years of your mortgage Payback 4. How long does it take to save enough for the down payment? 5. How long will it take to fully own the rental house? 6. What are the potential issues (factors) that may affect your capital budgeting analysis ? 7. What are the most important revenue/expense items for rental business? 8. Conclusion, lesson learned, implication, etc. . 2
