Question 2: Entertainment Showland, one of the leading entertainment center chains in North America, has decided to establish a comprehensive entertainment center in Istanbul. It has been observed that the highest cost item in the cost structure of the firm is "rental expenses". Therefore, in future projects, the principle of undertaking the construction investment in the firm has been adopted. Cesur naat Mavirlii A.., operating in the regional market, to clarify the investment decision in Istanbul. was contacted and a detailed report was requested. Cesur Construction Consultancy Inc. As a result of his study, he presented an analysis that will form the basis of the feasibility report for two alternative projects: First alternative; the construction of the building as reinforced concrete with the local building system, . Second alternative; It is the construction of the building as a more modern steel construction. Information on the alternative-1: The expected life of the reinforced concrete structure is 20 years, Construction cost according to the design is 106 million TL, Land development cost is 30 Million TL, At the end of the 20th year, the scrap value of the building is 31 Million TL, Maintenance costs of 6 Million TL at the end of the 5th year, 9 Million TL at the end of the 10th year, and 3 Million TL every year from the end of the 11th year, HVAC (Heating, Cooling and Ventilation) and fuel costs 2.7 Million TL per year, Annual operating expenses 9.6 Million TL, . . Annual revenues are estimated to be 44 Million TL. Information on Alternative-2: The expected life of the steel construction is 30 years, The construction cost according to the design is 126 million TL, Land development cost 35 Million TL, At the end of the 30th year, the scrap value of the building is 39 million TL, 1.7 million TL annual maintenance expenses throughout the life of the project, HVAC and fuel costs 3.7 Million TL annually, Annual operating expenses 10.6 Million TL, Annual revenues are estimated to be 55 Million TL. Cesur Construction Consultancy Inc. As a result of the negotiations with the company, it is guaranteed that both alternatives can be put into operation at the end of the first year. Investment was established in order to perform a show at the International Center and Entertainment company in Turkey. It is stated that this firm can get the required investment amount as a loan with the annual effective interest rate calculated in the first question. The applicable tax rate for this investment is 25% and linear depreciation will be applied in investment valuation. Within the scope of the term paper for the investment whose preliminary studies have been completed; 1) For steel construction and reinforced concrete building alternatives, income and expense values for each year end should be determined separately in Turkey. It is stated that this firm can get the required investment amount as a loan with the annual effective interest rate calculated in the first question. The applicable tax rate for this investment is 25% and linear depreciation will be applied in investment valuation. . Within the scope of the term paper for the investment whose preliminary studies have been completed; 1) For steel construction and reinforced concrete building alternatives, income and expense values for each year end should be determined separately and presented in a table. 2) Net cash flow diagrams should be drawn for both alternatives. 3) You see the feasibility of this investment in the course, Present Value Analysis (taking into account the EKOK method), Annual Value Analysis, Marginal Return (Internal Yield) Rate Analysis, Make a decision using methods. Comment separately the findings obtained as a result of applying each method in terms of investment decision. 4) In the light of the findings obtained as a result of applying all methods, which alternative or not choosing any alternative, do you think it is more appropriate? Consider all the methods for making this decision and comment in detail. (80 points) Note: It will not be sufficient to calculate with only numerical data within the scope of the homework, so the numerical results obtained by the methods must be interpreted. Monthly interest rate = 1.67% Nominal interest rate = 1.67%*12 = 20.04% effective annual interest rate = = (1+nominal interest rateo of compounding periods )^(no of ocmpounding periods) No of compounding periods = 12 So effective annual interest rate = (1+.2004/12)^(12) = 21.99% Question 2: Entertainment Showland, one of the leading entertainment center chains in North America, has decided to establish a comprehensive entertainment center in Istanbul. It has been observed that the highest cost item in the cost structure of the firm is "rental expenses". Therefore, in future projects, the principle of undertaking the construction investment in the firm has been adopted. Cesur naat Mavirlii A.., operating in the regional market, to clarify the investment decision in Istanbul. was contacted and a detailed report was requested. Cesur Construction Consultancy Inc. As a result of his study, he presented an analysis that will form the basis of the feasibility report for two alternative projects: First alternative; the construction of the building as reinforced concrete with the local building system, . Second alternative; It is the construction of the building as a more modern steel construction. Information on the alternative-1: The expected life of the reinforced concrete structure is 20 years, Construction cost according to the design is 106 million TL, Land development cost is 30 Million TL, At the end of the 20th year, the scrap value of the building is 31 Million TL, Maintenance costs of 6 Million TL at the end of the 5th year, 9 Million TL at the end of the 10th year, and 3 Million TL every year from the end of the 11th year, HVAC (Heating, Cooling and Ventilation) and fuel costs 2.7 Million TL per year, Annual operating expenses 9.6 Million TL, . . Annual revenues are estimated to be 44 Million TL. Information on Alternative-2: The expected life of the steel construction is 30 years, The construction cost according to the design is 126 million TL, Land development cost 35 Million TL, At the end of the 30th year, the scrap value of the building is 39 million TL, 1.7 million TL annual maintenance expenses throughout the life of the project, HVAC and fuel costs 3.7 Million TL annually, Annual operating expenses 10.6 Million TL, Annual revenues are estimated to be 55 Million TL. Cesur Construction Consultancy Inc. As a result of the negotiations with the company, it is guaranteed that both alternatives can be put into operation at the end of the first year. Investment was established in order to perform a show at the International Center and Entertainment company in Turkey. It is stated that this firm can get the required investment amount as a loan with the annual effective interest rate calculated in the first question. The applicable tax rate for this investment is 25% and linear depreciation will be applied in investment valuation. Within the scope of the term paper for the investment whose preliminary studies have been completed; 1) For steel construction and reinforced concrete building alternatives, income and expense values for each year end should be determined separately in Turkey. It is stated that this firm can get the required investment amount as a loan with the annual effective interest rate calculated in the first question. The applicable tax rate for this investment is 25% and linear depreciation will be applied in investment valuation. . Within the scope of the term paper for the investment whose preliminary studies have been completed; 1) For steel construction and reinforced concrete building alternatives, income and expense values for each year end should be determined separately and presented in a table. 2) Net cash flow diagrams should be drawn for both alternatives. 3) You see the feasibility of this investment in the course, Present Value Analysis (taking into account the EKOK method), Annual Value Analysis, Marginal Return (Internal Yield) Rate Analysis, Make a decision using methods. Comment separately the findings obtained as a result of applying each method in terms of investment decision. 4) In the light of the findings obtained as a result of applying all methods, which alternative or not choosing any alternative, do you think it is more appropriate? Consider all the methods for making this decision and comment in detail. (80 points) Note: It will not be sufficient to calculate with only numerical data within the scope of the homework, so the numerical results obtained by the methods must be interpreted. Monthly interest rate = 1.67% Nominal interest rate = 1.67%*12 = 20.04% effective annual interest rate = = (1+nominal interest rateo of compounding periods )^(no of ocmpounding periods) No of compounding periods = 12 So effective annual interest rate = (1+.2004/12)^(12) = 21.99%