The CEO of PARC has asked your team to evaluate the potential for another site near the beach hotel. A prime property along the highway is available and he would like to develop a small shopping center that would include a restaurant and some shops. Based on his experience, he believes that the company will need to invest $45,000 to $60,000, uniformly distributed, on planning. In addition, he feels that the costs of construction are likely to average $1,250,000 with a standard deviation of $100,000. Mean annual rent profits are expected to be $255,000 with a standard deviation of $20,000. The companys average cost of capital is 8%.

Using a Monte Carlo simulation in excel with 50 iterations, answer the following questions for the CEO:

a. What is the average IRR for the first 7 years of the project?

b. What is the average NPV for the same period?

c. Should the company invest in the project?