Lab03-3210-F13-HW2-Support

Lab03-3210-F13-HW2-Support - School of Hotel Administration...

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1 School of Hotel Administration Cornell University HAdm 3210 – Principles of Hospitality Real Estate Fall 2012 - Lab 3 Homework 2 Support – Real Estate Investment Analysis The assignment asks you to prepare a response to a stylized case involving a new development in Collegetown; the idea is to connect urban form and land uses with financial feasibility. The assignment can be completed in pairs. Let’s take a few minutes to go over the questions. ASSIGNMENT 1. Review the spreadsheet template, you will be asked to modify it in questions 2 & 4. 2. Quantify the impact of four scenarios on the Base Case spreadsheet. There are two parts to this question: Part 1 – Make changes to the “Base Case” as detailed in the homework and as recapped below; answer questions related to each scenario. Part 2 – Summarize the impact of the five scenarios on Table A Scenarios: a. Late in the planning process, you find out that your construction costs will be 3% higher than originally anticipated. Further, this cost increase will have to be borne by the equity, as the lender will not increase the loan size to cover any part of the construction cost increase. Answer the following questions: i. Summarize which cash flows are changing, use Table A as your guide. ii. Does this change have an impact on the overall project NPV/IRR, the equity NPV/IRR, or the lender’s yield? Characterize the impact of this change. iii. Would you still do this deal? Why or why not? b. Debt Interest Rates increase by 100 BP across the board as the project moves from concept to construction. (That is, what was formerly 50% LTV at 6.75% is now 50% LTV at 7.75% - all the other debt interest rates are similarly impacted – see the financing inputs above.) What is the impact of this change on the feasibility of your project? Specifically: i. Summarize which cash flows are changing, use Table A as your guide.
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