Assume you are helping Claire and are trying to determine if the Rockford shopping mall is a good investment of your $12.5 million inheritance, using a 20-year period. Assume operation of the facility begins in year 2 and the equity is utilized in year 1. The 20-year periods STARTS the first year of operation of the facility. Your friend estimates the 400,000 square foot mall will generate $35.65 per square foot. Maintenance and operating costs will be 4% of the total project cost, given in the table below. Assume the facility will begin to operate in year 2, and the equity is used in year 1. Description Estimated Cost (S)
Land 3,875,000
Bob Builder consulting fee 200,000
Corny Cornell consulting fee 180,000
Architect fee 740,000
Permitting cost 505,000
Design & consulting engineer fee 620,000
Grading and site work sub 3,659,000
Construction of shopping facility 4,750,000
Construction of parking lot 4,750,000
Installation of utilities by sub 3,050,000
Installation of electrical reticulation by sub 627,000
Landscaping sub 627,000
Allowance for fees of loans and interests 795,000
Total 94,596,000

Determine the:

a. Gross annual revenue
b. Annual maintenance costs
c. Net annual revenue
d. Estimated annual debt service
e. Estimated annual profit
f. Net present value, if the discount rate is 12.75%
g. Internal rate of return for the investment

The cost of capital: introduction the cost of capital: introduction companies issue bonds, preferred stock, and common equity to aise capital to invest in capital budgeting projects. capital is』necessary factor of production and like any other factor, it has a cost. this cost is equal to the select the applicable security. the rates of return that investors require on bonds, preferred stocks, and common equity represent the costs of those securities to the firm. companies estimate the required returns on their securities, calculate a weighted average of the costs of their different types of capital, and use this average cost for capital budgeting purposes. required return on rate: when calculating om operations when the firm's primary financial objective is to select shareholder value. to do this, companies invest in projects that earnselect their cost of capital. so, the cost of capital is often referred to as the -select -select and accruals, which a se spontaneously we hted average cost of capital wa c our concern is with capital that must be provided by select- 쑤 interest-bearing debt preferred stock and common equity. capital budgeting projects are undertaken, are not included as part of total invested capital because they do not come directly from investors. which of the following would be included in the caculation of total invested capital? choose the response that is most correct a. notes payable b. taxes payable c retained earnings d. responses a and c would be included in the calculation of total invested capital. e. none of the above would be included in the cakulation of total invested capital.

Aproduction line has three machines a, b, and c, with reliabilities of .96, .86, and .85, respectively. the machines are arranged so that if one breaks down, the others must shut down. engineers are weighing two alternative designs for increasing the line’s reliability. plan 1 involves adding an identical backup line, and plan 2 involves providing a backup for each machine. in either case, three machines (a, b, and c) would be used with reliabilities equal to the original three. a. compute overall system reliability under plan 1. (round your intermediate calculations and final answer to 4 decimal places.) reliability b. compute overall system reliability under plan 2. (round your intermediate calculations and final answer to 4 decimal places.) reliability c. which plan will provide the higher reliability? plan2plan1

Aproperty title search firm is contemplating using online software to increase its search productivity. currently an average of 40 minutes is needed to do a title search. the researcher cost is $2 per minute. clients are charged a fee of $400. company a's software would reduce the average search time by 10 minutes, at a cost of $3.50 per search. company b's software would reduce the average search time by 12 minutes at a cost of $3.60 per search. which option would have the higher productivity in terms of revenue per dollar of input?