Waldo County mini case

WALDO COUNTY Minicase Solution

Inputs: Year 0 1 Cash Flows:

Inflation 2% Investment (Real) Land -30

Discount rate Construction -20 -30 (real) 0.0686 Operations:(Real) (nominal) 0.090 Rentals

Share of rentals sales Tax rate 0.35 Operating & maint costs -2 -4

Real Estate Taxes -2 -2 Forecast errors: Pre tax Cash Profits -4 -6

Tax -1.4 -2.1 Rentals 0 Post tax cash profits -2.6 -3.9 Share of sales 0 Constructions 0 Cash flow (real) -52.6 -33.9

PV $79.67 No Delay? 1 Delay? 0 Dep Tax Shields(nominal)

Dep

Tax shield

PV $9.50

NPV $36.56

2 3 4 5 6 7 8 9 10 11 4 5

-10

12 12 12 12 12 12 12 12 12 24 24 24 24 24 24 24 24 24

-4 -10 -10 -10 -10 -10 -10 -10 -10 -10 -3 -4 -4 -4 -4 -4 -4 -4 -4 -4 -7 22 22 22 22 22 22 22 22 22

-2.45 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 -4.55 14.3 14.3 14.3 14.3 14.3 14.3 14.3 14.3 14.3

-14.55 14.3 14.3 14.3 14.3 14.3 14.3 14.3 14.3 14.3

4 4 4 4 4 4 4 4 4

1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4

12 13 14 15 16 17 18 19

30 0

12 12 12 12 12 12 0 24 24 24 24 24 24 0

-10 -10 -10 -10 -10 -10 0 -4 -4 -4 -4 -4 -4 0 22 22 22 22 22 22 0

7.7 7.7 7.7 7.7 7.7 7.7 0 14.3 14.3 14.3 14.3 14.3 14.3 0

14.3 14.3 14.3 14.3 14.3 14.3 30 0

4 4 4 4 4 4 0

1.4 1.4 1.4 1.4 1.4 1.4 0