Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Alabama National Guard has asked your development company for a preliminary proposal to deliver a 10,000 SF small multi-purpose military education building on a

image text in transcribed
The Alabama National Guard has asked your development company for a preliminary proposal to deliver a 10,000 SF small multi-purpose military education building on a design- build-finance-operate-maintain (DBFOM) arrangement with a 30-year term. A preliminary cost estimate developed by your company indicates a total construction cost of $2.2 million. Your boss would like you to check if this project is financially feasible according to the following information: a. The required rate of return is 7% for a 10-year period of time. . A 4.0% interest rate for a 5-year secured loan compounded annually. This loan is to be 5- V. Operation and maintenance costs = $12/SF/year. vd Annual Fire Insurance Cost=0.08% of initial project cost Ve. Periodic Utility Upgrade Cost = $15,000 every 6 years f. Periodic Structural Upgrade Cost = $25,000 every 10 years g. They believe they can generate $2,500,000 in revenue each year which will result in a profit of 16% of gross revenue. Assume that the calculation of this profit does not include the operation and maintenance costs, fire insurance, and upgrade costs mentioned above. As a result of this analysis, you must submit to your boss the following documents and information: 1. Total amount of interest to be paid on the loan. 2. Draw the cash flow diagram for the 10-year break-even period. 3. Calculate the Net Present Value for this investment and determine if it is acceptable

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Entrepreneurship

Authors: Andrew Zacharakis, William D Bygrave

5th Edition

1119563097, 9781119563099

More Books

Students also viewed these Finance questions

Question

Why is service recovery so important to companies?

Answered: 1 week ago

Question

Explain the importance of prioritizing training and HRD needs

Answered: 1 week ago