The holt lunsford commercial case

Assignment Help Corporate Finance
Reference no: EM132184238

Case Study - The "Holt Lunsford Commercial" Case

Read the "Holt Lunsford" case study and answer the below questions.

You are required to write at least 3 pages (font: 12; line spacing: 2).

- Based on the information provided in the case study, do you recommend Staton Tees to remain in the Welch building, irrespective of financing method, or relocate to a newly built facility in a different location? Discuss your rationale based on considerations, for example, with regard to the long-term strategy, operational needs of the firm and property market conditions.

- Assuming thatStaton Tees decides to remain in the Welch building, which financing method should they choose? To make your recommendations, discuss

1) Strategic considerations with regard to the financing options.

2) Financial considerations by conducting a DCF for each financing option.
- For the DCF, use the information provided in the case study and conduct a lease vs. buy analysis on a after-tax basis and using the Income Statement approach. Please feel free to make assumptions if needed (e.g. regarding the roof replacement).

Business Assumptions:
- Sales: In 2012, Staton's sales were $223million. Over the next 5 years, sales are expected to increase by 5% per year and then increase by 3% for the next 5 years.
- Cost of Goods Sold (COGS): Cost of goods sold are expected to remain at 40% of total sales for the next 10 years.
- Business expenses: Non-real estate business expenses are expected to be 11.5% of total sales for the next 10 years.
- Income tax: The corporate income tax for Staton is 35%. Capital gains tax is 15%.
- Discount rate: Staton requires a return of 15% (after tax).

Lease option:
- Assume a 10-year NNN lease with occupancy cost of $4.5 per SF ($3/SF rent; operating expenses of $1.5/SF) and a 3% inflation adjustment every 3 years.
Buy option:
- Assume a purchase price of $4,048,300. The building value represents 80% of the purchase price and a straight-line depreciation over 39 years should be used.
- The operating expenses per SF are the same as for the lease option.
- Assume that Staton is not interested in full recourse short-term debt financing option and decides to finance the acquisition with a 75% LTV mortgage at 5% for 25 years (monthly compounding, fully amortizing). Assume no closing costs.
- The firm expects to sell the building in year 10. The sales price for the building is expected to be $5,985,000 in year 10. Assume no selling costs.

Case reference - holt lunsford commercial by Arthur I SEGEL and JOHN H. VOGEL

Attachment:- Case Study.rar

Verified Expert

This is a short assignment which requires an excel calculation of two aspect lease and rent to define the fact that how the NPV is being estimated. Purely an excel assignment which helps in understanding how calculations can be justified in excel format.

Reference no: EM132184238

What can management do to improve te given is fraction

Is the process "capable: of producing components that meet specification? What fraction of components will fall outside of specification? What can management do to improve

Explain the companys ratios against the industry averages

MBA 6016- Compare all ratios to industry averages. Evaluate the company's ratios against the industry averages. Explain the significance of the company's ratios when compared

Analyze why limited leverage is good for business

Analyze "Frank Smith Plumbings Financial Statement" spreadsheet. Why limited leverage is good for business.Show profitability of the project so that Stephanie can convince he

The two projects yield the following predicted annual result

Aikman Company has an opportunity to invest in one of two projects. Project A requires a $ 240,000 investment for new machinery with a four  year life and no salvage value.

Describe the companys initial public offering

Describe the industry in which they operate and key elements of the economy or current events impacting your organization. Identify the market they are traded on and describ

Create an outline for your email report

Independently research current data about consumer debt.- Create an outline for your email report.- Draft the first paragraph, which will include the purpose and main points.

Foreign exchange hedging using foreign currency derivatives

The budget rate, the lowest acceptable dollar per pound exchange rate, was therefore established at $1.70 per British pound. Any exchange rate below would result in Dayton a

Limited liability corporation

Firm whose profitability is highly sensitive to the price it must pay for oil, which of the following finance functions would be most critical to stabilizing that price?

Reviews

len2184238

12/3/2018 3:01:31 AM

Please note, I only need some corrections made to my spreadsheet. Please see the markups written in Red from my Professor. For example, adjustments made to Operations Expenses, Depreciation Formula, and WACC and Discounted Cash Flow for Buy vs. Lease Options to name a few. Since I only need those corrections, I have have reflected that in my expected cost. Also, please make any other adjustments necessary.

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd