Question 1: Entertainment Showland, one of the leading entertainment center chains in North America, decided to establish a comprehensive entertainment center in Istanbul due to its international and metropolitan character. When the cost structure of the company is analyzed, it is seen that the highest cost item consists of rent expenses. Therefore, the construction investment will be made by the company. They contacted with Cesur naat Mavirlii A.. and requested a detailed report to clarify their investment decisions in Turkey. As a result of the joint work with the entrepreneur firm, Cesur naat Mavirlii A.. has provided an analysis that will form the basis of the feasibility report for two alternative projects.

• First alternative: To construct the building system as reinforced concrete.
• Second alternative: To construct the building system as steel construction.

  As a result of the negotiations with Cesur naat Mavirlii A.., construction of both alternatives will be completed and operation will be start at the end of the 1^st year (incomes and expenses will be start at the end of the 2^nd year, expected lifetime includes construction duration). A company named International Entertainment and Show Center has been established in Turkey for the investment. It is determined that the required investment can be made with a loan. The interest rate is the 16.67. For such investments, the applicable tax rate is 30% and straight line depreciation will be applied in the valuation of the investment.

  For the investment that preliminary studies have been completed;

• Prepare the tables that show income and expenditure budgets of each year separately for both steel and reinforced concrete construction alternatives.
• Draw cash flow diagrams for each alternative.
• Compare alternatives by calculating the PW (by using least common multiple (LCM) method), AW, and ROR analysis.
• In the light of the findings obtained by applying all methods, which alternative should be chosen? Or should the doing nothing alternative be chosen? All methods must be taken into account to make this decision. Please explain in detail.

• Note: You need to make calculations using the numerical data, but this is not sufficient. You also need to explain and discuss the numerical results found by different methods.

  Note: Computer (word, excel, etc.) can be used; however, each calculation should be clear. The excel tables without calculation and formulas will not be graded.

1st alternative 30 years 2nd alternative 40 years (150) million TL (125) million TL Expected lifetime Construction cost Land development cost Salvage value (at the end of the lifetime) (28) million TL (33) million TL (40) million TL (47) million TL Maintenance cost 3.8 million TL per year 8 million TL at the end of the 6th year 10 million TL at the end of the 12th year 4 million TL per year starting from the end of the 15th year 3.0 million TL per year 4.0 million TL per year HVAC and fuel expenses Operating expenses Revenue 10.3 million TL per year 12.3 million TL per year (41) million TL per year (48) million TL per year 1st alternative 30 years 2nd alternative 40 years (150) million TL (125) million TL Expected lifetime Construction cost Land development cost Salvage value (at the end of the lifetime) (28) million TL (33) million TL (40) million TL (47) million TL Maintenance cost 3.8 million TL per year 8 million TL at the end of the 6th year 10 million TL at the end of the 12th year 4 million TL per year starting from the end of the 15th year 3.0 million TL per year 4.0 million TL per year HVAC and fuel expenses Operating expenses Revenue 10.3 million TL per year 12.3 million TL per year (41) million TL per year (48) million TL per year