Year
Investment:		0	1	2	3	4	17-May
land		30
construction		20	30	10
Operation:
Rentals					12	12	12
share of retail sales					24	24	24
operating and maintence costs		2	4	4	10	10	10
Real estate taxes		2	2	3	4	4	4
	Table 10.8: Projected revenue and cost in real terms for the downeast Tourist mal (figures in $ millions)
	1. What is the Projects NPV given projections in the above table?
	2. Conduct a sensitivity and a scenario analysis of the project. What do these analyses reveal about the project risk and potential value?
	Case Study: Waldo County
	Read the case study Waldo County at the end of Chapter 10. In a two to four page paper, address the following:
	Given the projections in the Table 10.8, in one- to two pages, calculate the NPV and interpret your results.
	In one to two pages, construct a sensitivity and a scenario analysis of the project and explain what these analyses reveal about the project's risks and potential value to the firm.
Waldo County:
	Waldo County, the well-known real estate developer, worked long hours, and he expected his staff to do
	the same. So George Chavez was not surprised to receive a call from the boss just as George was about
	to leave from a long summer weekend. Mr. Countys success has been built on a remarkable instinct for a
	good site. He would exclaimed location, location ,location at some point in every plan meeting.
	Get financed was not his strong suit. On this occasion he wanted George to go over the figures for a
	new 90 million outlet mall design intercept tourists heading Down east toward Maine George first task
	was to draw up a summary of the project revenue and cost the results are shown in Table 10.8note that
	the moles revenue would come from two sources the company would charge retail and annual rent for
	the space they occupied in additional it would receive 5% of each stores gross sale. Construction of the
	mall was likely to take three years. The construction cause could be depreciated straight line over 15
	years starting in year 3 as in the case of the company other developments, the mall would be built to the
	highest specification and would not need to be rebuilt until year 17.the land was expected to retain its
	value but could not be depreciated for tax purpose. Construction costs, revenue, operating, and
	maintenance costs, and real estate tax for all likely to rise in line with inflation which was forecasted as
	2% a year. The companys tax rate was 35% and the cost of capital was 9% in nominal terms.George
	decided first to check the project made financial sense he then proposed to look at some of the things
	that might go wrong pinball certainly had a nose for a good retail project but he was not infallible.