Waldo Case Essay

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Case Project Jeff Moberly Duncan University BOL 622: Advanced Finance I. Introduction The mini-case being examined is based on Waldo County, a fictional real estate developer. Although he worked hard, expected the same from his employees, and had a knack for finding profitable locations, he was lacking in his financial skills. Therefore, the following analysis of his projected cash flow statements was necessary. In this particular situation, Mr. County wanted a member of his staff (George) to “go over the figures for a new $90 million outlet mall designed to intercept tourists heading down east toward Maine.” In order to begin, George first drew up a summary of the projected revenues and costs. The information he provided in Table 10.8 from the text, along with several other factors were the basis for the case study. The information gleaned from his initial report was calculated in order to provide some basic information. Since all initial costs and future cash flows had been identified, an analysis of those numbers using appropriate techniques based on present value was required in order to make the decision of whether or not to invest in the project. II. Summary Some of the essential points of the case situation are as follows: The company would charge retailers an annual rent for the space they occupied, and in addition it would receive 5% of each store's gross sales. Construction of the mall was likely to take three years. The construction costs could be depreciated straight-line over 15 years starting in year 3. As in the case of the company's other developments, the mall would be built to the highest specifications 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 purposes. Construction costs, revenues, operating and maintenance costs, and real estate

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