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Teresa Badillo

ACG 6305
The Dallas Project
After analyzing the information, I found that it would be best to allocate
the purchase costs based on the real estate corporations valuations. They
valued the undeveloped acreage at $89 million, finished lots at $1 million
and the recreation facilities at $10 million. As shown on the following
schedule, I allocated those percentages (89%, 1% and 10% respectively)
based on what the purchase price was ($33,000,000). With this basis, the
projected net present value was approximately $143,180,000.
This project is a slam-dunk for the corporation because it generates
$274,980,000 of net income after taxes and a net present value of
$143,180,000. There are also positive cash flows throughout the decade
after the initial purchase and this project has approximately an 80% internal
rate of return. All this in mind, this project would be a very profitable one.