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HOMEWORK 6 You are faced with the following two investment decisions. Evaluate both of the projects using the spreadsheet Excel and select which alternative is appropriate to proceed with: Project 1: You will get bank loan for 5 years payback to buy a land of value $500,000. You have $200,000 capital (own money). As soon as you buy the land you will get a designer to prepare architectural and engineering drawings for $80,000 in 6 months. You will spend $50,000 for the permits from the municipality once design is ready. You will set up a team on 7th month for the project and rent an office which will cost you an overhead of $15,000 per month. So this is all you need to spend for the first year. The following year, you will start the construction. Cost of construction is estimated as $1,000,000 which is going to last one year. Your expectation for the sell of properties you constructed is as follows: $2,000,000 in second year, $3,000,000 in third year, $2,000,000 in fourth year and remaining $1,000,000 in sixth year. Bank loan compound interest rate is 8% and your expected rate of return is 15%. HOMEWORK 6 Project 2: You found a financer who wants to be a partner to this project and wants half of the properties in return. You have $100,000 capital (own money). Your expected rate of return is 15%. HOMEWORK 6 You are faced with the following two investment decisions. Evaluate both of the projects using the spreadsheet Excel and select which alternative is appropriate to proceed with: Project 1: You will get bank loan for 5 years payback to buy a land of value $500,000. You have $200,000 capital (own money). As soon as you buy the land you will get a designer to prepare architectural and engineering drawings for $80,000 in 6 months. You will spend $50,000 for the permits from the municipality once design is ready. You will set up a team on 7th month for the project and rent an office which will cost you an overhead of $15,000 per month. So this is all you need to spend for the first year. The following year, you will start the construction. Cost of construction is estimated as $1,000,000 which is going to last one year. Your expectation for the sell of properties you constructed is as follows: $2,000,000 in second year, $3,000,000 in third year, $2,000,000 in fourth year and remaining $1,000,000 in sixth year. Bank loan compound interest rate is 8% and your expected rate of return is 15%. HOMEWORK 6 Project 2: You found a financer who wants to be a partner to this project and wants half of the properties in return. You have $100,000 capital (own money). Your expected rate of return is 15%