i) What are the values of S, K, t, sigma and risk-free rate for the option involved? Show calculations (e.g., sigma) for each variable, if required.
EXHIBIT 1 FEASIBILITY ANALYSIS OF CITIC TOWER II Estimate of Construction Costs Summary of Estimate "Hard Costs m2 Per floor Gross Estimated cost (assumed all in per m) TOTAL S 1,800 13,000 819,000,000 1. Office Tower. No. of Floors: 35 2. Other Construction Costs: a. Basement, say b. Other 2 5,000 4,000 20,000,000 Subtotal $: 839,000,000 Add: 3. Contingency, say 4% of estimated costs 33,560,000 TOTAL $ 872,560,000 4. Professional Fees, say 5% of construction costs $ 43,628,000 TOTAL ESTIMATED COSTS OF CONSTRUCTION S: 916,188,000 Say, $ 0.92 billion EXHIBIT 1 FEASIBILITY ANALYSIS OF CITIC TOWER II (CONTINUED) PROCUREMENT PHASE At t=0: Year 2002 (ALL x $1000) Year 2003 Year 2002 PROCUREMENT PHASE Land purchase (including transaction costs) 1,000,000 Design and construction 528,000 370,000 Leasing 30,000 NET CASHFLOW (Yrs 2-3) $: 1,000,000 528,000 400.000 Development Costs (Years 2-3): $ 1,598,488 EXHIBIT 2 GRADE A OFFICE RENTAL AND CAPITAL VALUE INDICES Indices 1989=100 Year Otr Price Rental 1986 1987 1988 1989 89 102 104 107 100 102 107 106 1990 105 102 100 1991 1992 109 93 97 100 1993 102 105 111 114 1994 123 123 132 138 146 149 155 169 208 232 228 226 206 193 176 171 184 182 174 202 220 223 204 1995 134 141 145 144 136 133 124 114 111 111 111 1996 1997 113 115 117 191 1998 161 146 104 99 1999 118 115 108 97 87 108.2 99.1 96.4 96.3 96.9 100.5 101.6 104.0 109.1 107.9 104.5 98.4 100.2 102.0 99.3 97.8 94.5 88.0 88.4 88.0 85.5 2000 2001 79.1 EXHIBIT RISK-FREE RATES IN HONG KONG Bills: Yield: 1 Month % pa 6.91 5.24 Exchange Fund Bills Bills: Yield: 3 Months % pa 8.78 5.84 6.03 5.92 7.3 9.26 5.21 5.71 7.87 7.19 8.74 7.56 14.03 6.64 6.06 4.94 12.24 7.51 Bills: Yield: 12 Months % pa 10.58 7.23 7.36 7.27 8.31 10.25 9.16 11.7 8.45 6.94 6.25 5.72 6.88 6.69 6.25 5.49 5.91 6.21 4.87 5.42 5.04 6.01 5.58 5.39 5.55 5.47 5.19 4.48 4.77 5.35 4.69 4.94 5.36 5.88 5.56 5.58 5.85 5.83 6.02 5.92 5.15 5.41 Jan-98 Feb-98 Mar-98 Apr-98 May-98 Jun-98 Jul-98 Aug-98 Sep-98 Oct-98 Nov-98 Dec-98 Jan-99 Feb-99 Mar-99 Apr-99 May-99 Jun-99 Jul-99 Aug-99 Sep-99 Oct-99 Nov-99 Dec-99 Jan-00 Feb-00 Mar-00 Apr-00 May-00 Jun-00 Jul-00 Aug-00 Sep-00 Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 5.88 5.43 5.5 4.91 4.94 5.46 5.98 5.75 4.81 3.38 5.32 5.82 6.04 5.47 5.67 6.09 5.61 5.72 6.1 6.44 6.25 6.31 6.89 6.64 6.21 6.53 5.94 6.27 6.37 5.96 5.6 6.15 5.9 5.6 5.55 5.94 5.1 4.85 4.68 6.02 6.01 5.79 6.23 6.15 6.03 5.85 5.65 5.69 5.38 4.7 4.63 4.63 4 4.92 4.76 4.64 4.03 3.58 3.45 3.44 3.16 2.2 1.89 4.25 3.83 3.62 3.46 3.51 3.19 3.7 3.54 3.29 2.29 2.1 2.3 1.89 EXHIBIT 1 FEASIBILITY ANALYSIS OF CITIC TOWER II Estimate of Construction Costs Summary of Estimate "Hard Costs m2 Per floor Gross Estimated cost (assumed all in per m) TOTAL S 1,800 13,000 819,000,000 1. Office Tower. No. of Floors: 35 2. Other Construction Costs: a. Basement, say b. Other 2 5,000 4,000 20,000,000 Subtotal $: 839,000,000 Add: 3. Contingency, say 4% of estimated costs 33,560,000 TOTAL $ 872,560,000 4. Professional Fees, say 5% of construction costs $ 43,628,000 TOTAL ESTIMATED COSTS OF CONSTRUCTION S: 916,188,000 Say, $ 0.92 billion EXHIBIT 1 FEASIBILITY ANALYSIS OF CITIC TOWER II (CONTINUED) PROCUREMENT PHASE At t=0: Year 2002 (ALL x $1000) Year 2003 Year 2002 PROCUREMENT PHASE Land purchase (including transaction costs) 1,000,000 Design and construction 528,000 370,000 Leasing 30,000 NET CASHFLOW (Yrs 2-3) $: 1,000,000 528,000 400.000 Development Costs (Years 2-3): $ 1,598,488 EXHIBIT 2 GRADE A OFFICE RENTAL AND CAPITAL VALUE INDICES Indices 1989=100 Year Otr Price Rental 1986 1987 1988 1989 89 102 104 107 100 102 107 106 1990 105 102 100 1991 1992 109 93 97 100 1993 102 105 111 114 1994 123 123 132 138 146 149 155 169 208 232 228 226 206 193 176 171 184 182 174 202 220 223 204 1995 134 141 145 144 136 133 124 114 111 111 111 1996 1997 113 115 117 191 1998 161 146 104 99 1999 118 115 108 97 87 108.2 99.1 96.4 96.3 96.9 100.5 101.6 104.0 109.1 107.9 104.5 98.4 100.2 102.0 99.3 97.8 94.5 88.0 88.4 88.0 85.5 2000 2001 79.1 EXHIBIT RISK-FREE RATES IN HONG KONG Bills: Yield: 1 Month % pa 6.91 5.24 Exchange Fund Bills Bills: Yield: 3 Months % pa 8.78 5.84 6.03 5.92 7.3 9.26 5.21 5.71 7.87 7.19 8.74 7.56 14.03 6.64 6.06 4.94 12.24 7.51 Bills: Yield: 12 Months % pa 10.58 7.23 7.36 7.27 8.31 10.25 9.16 11.7 8.45 6.94 6.25 5.72 6.88 6.69 6.25 5.49 5.91 6.21 4.87 5.42 5.04 6.01 5.58 5.39 5.55 5.47 5.19 4.48 4.77 5.35 4.69 4.94 5.36 5.88 5.56 5.58 5.85 5.83 6.02 5.92 5.15 5.41 Jan-98 Feb-98 Mar-98 Apr-98 May-98 Jun-98 Jul-98 Aug-98 Sep-98 Oct-98 Nov-98 Dec-98 Jan-99 Feb-99 Mar-99 Apr-99 May-99 Jun-99 Jul-99 Aug-99 Sep-99 Oct-99 Nov-99 Dec-99 Jan-00 Feb-00 Mar-00 Apr-00 May-00 Jun-00 Jul-00 Aug-00 Sep-00 Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 5.88 5.43 5.5 4.91 4.94 5.46 5.98 5.75 4.81 3.38 5.32 5.82 6.04 5.47 5.67 6.09 5.61 5.72 6.1 6.44 6.25 6.31 6.89 6.64 6.21 6.53 5.94 6.27 6.37 5.96 5.6 6.15 5.9 5.6 5.55 5.94 5.1 4.85 4.68 6.02 6.01 5.79 6.23 6.15 6.03 5.85 5.65 5.69 5.38 4.7 4.63 4.63 4 4.92 4.76 4.64 4.03 3.58 3.45 3.44 3.16 2.2 1.89 4.25 3.83 3.62 3.46 3.51 3.19 3.7 3.54 3.29 2.29 2.1 2.3 1.89
