Question 1
Assuming you are the asset manager of the joint venture company created for this project, with the aid of MS Excel, appraise the rate of return for this white site using a discounted cash flow analysis.
Embed your MS Excel file into your MS Word file (MS Word>INSERT>Object>Create from File>Browse>Select your MS Excel file>Insert>Select “Display as an icon”>Click “OK”).
Use the following assumptions:
Construction cost of commercial element = $2700/m²
Construction cost of serviced apartment = $2950/m²
Construction cost of communal facilities = $3000/m²
The ratio of lettable floor area to gross floor area = 0.9: 1
Commercial/Communal monthly rental = $15 psf
Service apartment rental = $10 psf
Monthly operating cost = $1 psf
Every 5 years of rental income and outgoing expenses increase by 5%
Outgoing expenses increase by 10% after Year 30
The lifespan of proposed building = 60 years
Vacancy rate = From Year 10 onwards, every 5 years at 5%. From year 30, every 5 years at 10%.
1 m² = 10.7639 feet²
Question 2
Assuming you are a facilities asset manager and you found a piece of land that would be perfect for your asset portfolio.
a. Recommend the two approaches you can use to appraise the land and give an offer to the seller?
b. Demonstrate the process of your appraisal to justify the offer to the seller for the piece of land.
Question 3
Comparing the Net NPV and IRR figures in Question 1, answer the following questions:
a. Appraise the figures of NPV and IRR in Question 1.
b. Demonstrate the key reasons for facilities asset managers to calculate both NPV and IRR.
c. Which method is more suitable to help an asset manager make a more realistic long term investment project decision? Appraise the reasons for your selection.
d. In the analysis of both NPV and IRR, demonstrate which methodology do not have a discount rate issue.
