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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