In this assignment you are to look at these two potential projects and determine which, if any. can obtain a loan based on the facts given for the owner. The owner is trying to determine which project they can complete. Facts about the owner Our owner, Owner, has just sold their successful scooter rental/ice cream store business and now has extra money to invest in a new venture. After paying off their existing loans for the scooter inventory, Owner walked away from Scooters on a Rocky Road with a cool $1 million. Owner also got lucky and housing prices have risen in Townsville and their 1,500 square foot house is now worth $1.5 million. This is on top of their recent inheritance from dear old aunt Auntie of another $1 million and of course their retirement account from a career of designing lights for scooters which has another $2 million in it. Owner feels confident that they are ready to invest in a new venture. Projects: Shopping Center This project is to build a new shopping center that is focused on a Harry Potter theme where every storefront is reminiscent of Diagon Alley. Owner is a fan of Voldemort. so this is appealing to Owner. There would be 10 stores, each paying $100,000 per year in rent. It is estimated that it would cost $500,000 per store to build the shopping center. The bank has valued the center at $6.5 million when completed. The land is a bargain for this site as it sits on top of an old coal mine (there are minimal signs that the land is in danger of collapsing, it seems like a good risk). The cost of the land is only $200,000. Design fees are 5% of construction cost (does not include land cost). Butterfly Park: a very different type of project! In this project the idea is that butterfly fans will swarm to Butterfly Park to see rare butterflies. And to ensure they see them, Owner will be using state of the art animatronics to have butterflies there all year long. Yes, there will be some real butterflies, but the butterfly union is demanding some tough concessions so there will be a greater dependence on animatronics and part-time beetles dressed up as butterflies. The estimated cost to build the park is $3,000,000. Estimated operating costs is $500,000 per year. There is an estimate that 200,000 people will come to experience the park each year. They will pay $5 each to enter the park. The park is on an old Superfund site so it is only $100,000. Design fees are set at 5% of construction cost does not include land cost). Bonus - the hope is that the old chemicals will lead to new mutant varieties of butterflies. The value of the park is estimated at $4 million. Assumptions: you can get a 20 year loan at 6%, you will pay 5% of your income for maintenance each year and 30% of your income for utilities, you use 5% contingency Please put answers in table Question Shopping Center Butterfly Park Total Project Cost Maximum Loan to Cost Loan Amount Maximum Loan to Value Amount ratio Debt service coverage ratio: Projected profit: Profit Ratio Net Worth to Loan Ratio Potential Red Flag