Scenario for Homework #1 Let's say that a company has purchased a plot of land (approximately 15 acres) in an affluent suburb. They must now decide what to build on that land. The three options they are considering are listed in the table below along with the forecasted cash flows for each option. Complete the decision matrix on the next slide to determine which would be the best option (choose only one). Write a sentence or two explaining your answer and why you selected that project. Hint: Use Excel to do your calculations of NPV and PP. Turn in your Excel file with explanation to the drop-box for HW #1. (20 points) Cash Flows ($000) Initial Outlay Net Inflows per year Number of Years of inflows Apartment Building (100 units) $750 +$100 Office Park (40 8-room offices) $360 +$60 20 Shopping Center (8 stores) -$500 +$125 20 20 The Scoring Method (aka Decision Matrix) method Use 6% discount rate for NPV. Use Excel to calculate NPV and PP. For ratings on NPV, use NPV/100 (Example: if NPV = $550, use 5.5 for the rating on that project) For ratings on Payback Period, use the absolute value of the PP subtracted from 10 (Example: if PP = 7 years, use (10 - 7) = 3 for the rating on that project) Apartment Office Park Shopping Building (40 8-room Center (100 units) offices) (8 stores) Alignment with Strategic Goals 10 10 10 NPV (use 6%) Payback Period Low Risk TOTAL Weig! 9 5 Illu Turn in an Excel file that shows your calculations of NPV and PP, your completed decision matrix, & your written explanation of which project you chose and why