Background

A local company wants to develop a new 25-acre property in Irish Hills area in San Luis Obispo. The area is zoned agriculture currently, but the local planning commission is very receptive to developing more housing in this area. See pages 2 and 3 for information on the two projects that the company is evaluating as Alternative Models for this new Irish Hills project. Each Alternative Models has three different options such as home style or number of bedrooms.

Shea Homes: The cost for development of the site was $5,500,000. The preconstruction work cost was $500,000 with construction cost of $75,000,000. The project schedule had first turnover of units 3 months prior to completion. Preconstruction started in October 2014 and final turnover and completion was September 2016.

Pulte Homes: The land cost for the site was $4,351,000 and site development cost was $22,024,678. The home construction cost was $78,918,480. The development was done in 9 phases with construction cycle time of 3 months with completion date of September 2006.

Case Study Assignment No. 1

Create an excel spreadsheet for each of the two Alternative Models (Pulte and Shea) and calculate the following, using 10% for interest:

a) What is the equivalent cost in today’s dollars of the Pulte Homes project?

b) What is the equivalent cost in today’s dollars of the Shea Homes project?

c)What is the projected cost of the Shea Homes project if it was built in 2022?

d) What is the projected cost of the Pulte Homes project if it was built in 2024?

Answer rating: 100% (QA)

Equivalent cost of any expense in past Where E Equivalent cost at present i Rate of interest per yea... View the full answer