Just after completing your cash áow projections for Turtle Tower, along with some of the numbers needed to evaluate the return and risk associated with each investment, your boss, Bob Dobalina, calls. While everything is now Öne on the home front, he needs to stay a bit longer than expected. Heís spoken with Ray and Connie and theyíve been impressed with your work and your professionalism. Given this, Bob asks you to continue working on the analysis and then write up an analysis of the investment opportunities for them; informing them of the risks and returns associated with each property and a recommendation as to which property is the best investment for them based on your analysis and insight. Youíre scheduled to meet with the Marbles at 6:00 pm on Friday, April 21st.
Instructions:
This is the second part of a two-part case assignment. In this part, you will complete the investment performance measures and sensitivity analysis for Turtle Tower. The cash flow projections completed for part 1 of the assignment will serve as the basis of your analysis.
The standard investment recommendation contains the following elements:
Exhibits with the investment performance measures and sensitivity analyses for the two properties. This involves completing the last two spreadsheets in the Excel Öle that is provided.
A detailed analysis of the information presented in the cash áow statements based on the scenario provided in the original case assignment. This section should be no more than three pages and include the benefits and costs associated with each property as they relate to financial performance and the perceived risks. It is important that this section of the document be comprehensive in its assessment of risk and return, but also well-structured and to the point. The Marbles are well aware of the information presented in the case, so there is no need to rehash known facts except as they relate to particular issues.
A one-paragraph executive summary provides a general overview of the analysis, including the recommendation and essential characteristics of the preferred investment that make it attractive relative to the alternative. This should be the first page of your document and concisely summarize the analysis of the properties.
Analysis:
Detailed analysis
Extended summary with more detail regarding risk and return
Discuss measures of value, return, and related performance measures and compare the two properties in these terms.
Discuss the risks and unknowns associated with each property and compare the two properties in these terms. Are there other factors that come into play?
Identify your recommendation. Explain your choice in terms of risk and return.
Executive summary-
Which property do you recommend?
Does it meet the Marblesís investment objectives?
A brief overview of why the property you recommend is best for them. Help and hints:
All of the investment ratios and risk measures that you calculate as part of constructing the exhibits are relevant to your analysis and should be included in your discussion of the risk and return on investment. If there are other measures we have discussed in class that are not presented in the case, you should feel free to incorporate them into your exhibits and analysis.
You can take the numbers for Maxwell Medical Center as given. For the sensitivity analysis for Turtle Tower, compute the after-tax returns corresponding to each market rental growth rate and terminal capital rate.