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Investment Feasibility Analysis and Development Recommendations
2014
2014
Table of ContentsInvestment Feasibility Analysis and Development Recommendations Sample
• 1.0 Executive Summary
• 2.0 Property Description
• Overview
• Project Status
• Location
• Building Plan
• Components
• 3.0 Project Parameters
• 4.0 Development Stages
• 5.0 Construction Cost Estimates
• 6.0 Market Overview
• City Overview
• Population
• Geography
• Climate
• Foreign Direct Investment
• Visitor Arrival
• Serviced Apartment Market
• Hotel Market
• Residential Market
• Office Market
• Retail Market
• 7.0 Investment Parties and Interests
• Developer
• Partner
• Main Contractor
• Office Head Lease
• Senior Loan
• Pre-sale
• 8.0 Cash Flow Analysis
• Cash Flow Input
• Residential Cash Flow
• Commercial Cash Flow - Office
• Commercial Cash Flow - Retail
• Hotel Cash Flow
• Consolidated Cash Flow
• Considerations and
Recommendations
• 9.0 Conclusion
• Disclaimers
2
1.0 Executive Summary Investment Feasibility Analysis and Development Recommendations Sample
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2.0 Property Description Investment Feasibility Analysis and Development Recommendations Sample
42014
3.0 Project Parameters Investment Feasibility Analysis and Development Recommendations Sample
52014
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4.0 Development Stages Investment Feasibility Analysis and Development Recommendations Sample
6
5.0 Construction Cost Estimates Investment Feasibility Analysis and Development Recommendations Sample
• The construction costs have been estimated by the main contractor, [confidential] Corporation, with total costs of
approximately $51,000,000 divided into hard costs (82%), soft costs (10%), pre-opening costs (4%) and contingency
costs (4%), excluding land and financing costs, as follows:
• Hard Costs
• Site works cost is $295,406 which is the equivalent of $97/sqm
• Basement cost is $5,125,344 which is the equivalent of $897/sqm
• The construction cost for the residential and commercial components is $13,531,608 and $8,831,222
respectively, which is equals to 53% of the total hard cost
• The construction cost for the hotel is $14,200,819, accounting for 34% of the total hard cost
• Soft Costs
• Consultancy costs are 2% of total soft cost while design, architect and project management cost equal 10% of
total soft cost. The subtotal of soft costs is $5,038,128, which accounts for of 10% total cost
• Pre-opening Costs
• This includes the working capital for the pre opening activities and is equal to $2,000,000
• Contingency Costs
• A total of $1,900,000 has been allocated to contingency costs, for an amount of approximately 4% of total
construction cost
• Construction costs have been independently verified by an international third party quantity surveyor. The summary
of the costs breakdown has been included in the hard copy of Appendix
2014 7
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6.0 Market Overview Investment Feasibility Analysis and Development Recommendations Sample
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6.1 Visitor Arrivals Vietnam Investment Feasibility Analysis and Development Recommendations Sample
• International visitor arrivals reached a record 7.6
million in 2013, increasing by 10.6% from 2012
• The purpose of trip for 61.3% of visitors was
tourism, while 16.7% visited for business and 16.6%
visited family and friends
• 79.0% arrived to Vietnam by air while 18.5% arrived
by road and 2.6% arrived by sea
• The CAGR of international arrivals to Vietnam for
business purposes during the 5 year period of 2008
to 2013 has been 8.4%
• Average length of stay in Vietnam in 2012 was 9
days
61%17%
17%
5%
By Purpose of Trip (2013)
Tourism Business
Visiting Relatives Other
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Vis
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International Visitor Arrivals to VietnamBy Purpose of Trip
Tourism Business Visiting Relatives Other
-30%
0%
30%
60%
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13A
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ual G
row
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International Visitor Arrivals to Vietnam
Annual Growth Rate
International visitors Business
79%
3%
18%
By Means of Transport
(2013)
Air Sea Road
2014 9
2014
6.2 Serviced ApartmentAverage Daily Rate (ADR) and RevPAR
Investment Feasibility Analysis and Development Recommendations Sample
• Since ADR information is not available for Serviced Apartments, the weighted average Public Monthly Rates have
been used as a proxy in order to arrive at the estimated Serviced Apartment RevPAR
• Weighted average Monthly Public Rate of the first room category (cheapest available) = $1,649.50
• Discount factor applied to Public Rate (Entry Level Room Category) = 90%
• Weighted average Monthly Rate of (Entry Level Room Category)= $1,484.59
• Estimated ADR 2013 = $48.81 (1,484.59*12/365)
• Occupancy 2013 = 92.0%
• 2013 Estimated A & B Grade Serviced Apartment RevPAR = $44.90 (48.81 * 92%)
Name [confidential] [confidential] [confidential] [confidential] [confidential] [confidential] [confidential] [confidential]
Grade A B B B B B B B
Keys 78 180 30 29 15 20 124 6
Entry Level Room Category 1 Standard A Standard A 1 1 1 (H2) 1
Size (sm) 80 83.8 47 55 70 75 65 124
Quantity 54 72 6 6 11 4 18 3
Mnthly Rate 1,500 2,100 1,100 1,100 1,300 1,325 1,040 1,100
10
6.3 Hotel Total Supply Investment Feasibility Analysis and Development Recommendations Sample
• The total supply of 3 and 4 star hotels in [confidential]
currently stands at 1,175 keys across 17 properties
• The supply of 4 star hotels is 672 keys (7 hotels)
accounting for 57.2% of total supply, while 3 star hotel
rooms supply is 503 keys (10 hotels), accounting for the
remaining 42.8%
• There have been 2 main periods of supply growth in
[confidential] which coincide with peaks of the Vietnam
business and real estate cycle:
• 1997 – 2000: 225 keys to 587 keys (up 160.9%)
• 2006 – 2011: 718 keys to 1,175 keys (up 63.6%)
• Supply has remained stable since 2011
• The majority of supply is located in [confidential]
District, with 659 keys accounting for 56% of total
supply
• [confidential] District has 365 keys of
supply, representing 31%, while [confidential] District
and each have 1 property only
659, 56%
365, 31%
101, 9%
50, 4%
Location of 3 & 4 Star
Hotels
672, 57%
503, 43%
Hotel Supply in
[confidential]
4 star 3 star
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Su
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Keys)
Hotel Supply in [confidential]
4 Star 3 Star
2014 11
6.4 Hotel Supply Map Investment Feasibility Analysis and Development Recommendations Sample
2014 12
• 3 Star Hotel
• 4 Star Hotel
• Serviced Apartment
• The Property Site
1km Radius
2km Radius
Cat Bi International
Airport
Big C
Tam Bac Bus Station
International Hospital
Sport and ulture Center
Lach Tray Stadium
Train Station
2014
6.5 Hotel4 Star Public Rates and Room Types
Investment Feasibility Analysis and Development Recommendations Sample
Name [Confidential] [Confidential] [Confidential] [Confidential [Confidential [Confidential [Confidentiall Min Max Avg.
Grade 4 4 4 4 4 4 4
Keys 122 101 80 129 78 80 82
Room Category 1 Superior Deluxe Deluxe Deluxe Superior Standard Superior
Size (sm) 30 35 28 26 30.5 30 28 26 35 29.6
Quantity 82 115
Rate
Public 125
Corporate 99
Best Avail 115
Adv Purch 105 80
Sngl Public 57
Sngl Corp 54
Dble Public 69
Dble Corp 64
Single 70
Double 80
85.7
Public 100
Corp 80 92.5 57.1 57 125 81.0
Room Category 2 Deluxe Executive Executive Suite Deluxe Superior Deluxe
Size (sm) 30 45 45 52.5 40.2 35 33 30 52.5 40.1
Quantity 8 8
Rate
Public 145
Corporate 115
Best Avail 135
Adv Purch 122 100
Sngl Public 86
Singl Corp 79
Dble Public 98
Dble Corp 89
Single 110
Double130
Spr Single 130
Spr Dbl 150 95.2 115.1 66.7 66.7 145 102.6
Room Category 3 Executive Junior Suite Junior Suite Villa Junior Suite Deluxe Executive
Size (sm) 30 50 60 70 57.2 45 38 30 70 50.0
Quantity 6 2
Rate
Public 170
Corporate 135
Best Avail 160
Adv Purch 145 120
Sngl Pub 133
Sngl Corp 129
Dble Publ145
Dble Corp 139 138.1 162.6 76.2 76.2 170 133.3
Room Category 4 Apart Suite Suite Flat Suite Suite Suite
Size (sm) 60 75 54 64.2 55 70 54 75 63.0
Quantity 5 4
Rate
Public 190
Corporate 155 160 185.7 212.6 119 119 212.6 173.5
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7.0 Investment Parties Investment Feasibility Analysis and Development Recommendations Sample
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2014
8.0 Cash Flow Analysis Investment Feasibility Analysis and Development Recommendations Sample
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2014
8.1 Market Penetration AnalysisInvestment Feasibility Analysis and Development Recommendations Sample
• Due to several factors including the overall increase of tourist for Vietnam market, the increased number of Japanese
and Korean business visitors in [confidential] and the recovery of the Vietnamese economy. We have forecasted an
increase in demand of approximately 13% per year
• The limited new supply coming into the market and the increase in room demand should lead to progressive increase
in occupancies until the Subject Property will be opening and operating in 2017
Projected
Demand Growth 2014 2015 2016 2017 2018 2019 2020
Variance Var. Var. Var. Var. Var. Var. Var.
Leisure 5% 77,608 5% 81,489 5% 85,563 5% 89,841 10% 98,825 5% 103,766 5% 108,955
Mice 0% 36,956 10% 40,652 10% 44,717 15% 51,425 15% 59,138 10% 65,052 10% 71,557
Long Term 15% 14,167 5% 14,875 5% 15,619 10% 17,180 5% 18,040 5% 18,941 5% 19,889
Induced Demand 0% 0% 5% 7,295 0% 15% 26,400 3% 5,633 15% 30,060
Total Demand
(room/year) 128,731 6% 137,015 12% 153,194 8% 165,741 27% 209,698 8% 227,088 19% 269,789
Total Supply Base 215,350 215,350 215,350 215,350 215,350 215,350 215,350
New Supply
(Subject Ppty) 206 206 206 206 206
Property 1 100 100 100 100 100 100
Property 2 50 50 50
Property 3 200 200
Total Supply 215,350 251,850 327,040 327,040 345,290 418,290 418,290
Market Occupancy 60% 54% 47% 51% 61% 54% 64%
Penetration
Analysis 0% 0% -10% 5% 5% 10% 10%
Property
Occupancy 0% 0% 42% 53% 64% 60% 71%
16
8.2 Hotel Cash FlowInvestment Feasibility Analysis and Development Recommendations Sample
2014 17
1 2 3 4 5 6 7 8 9 10
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Development Status Soft Opening Start Up Start Up Stabilization Renovation
Hotel Component
Number of Rooms 206 206 206 206 206 206 206 206 206 206
Occupied Rooms/Room Sold 31,699 40,011 47,947 44,902 53,346 51,129 37,595 51,129 51,129 51,129
Annual Room Available 75,190 75,190 75,190 75,190 75,190 75,190 75,190 75,190 75,190 75,190
Room Occupancy 42% 53.2% 63.8% 59.7% 70.9% 68.0% 50.0% 68.0% 68.0% 68.0%
Average Daily Rate (ADR) - 85 94 94 108 113 119 119 119 124 131
RevPar 36 50 60 64 80 81 59 81 85 89
REVENUES
Room Revenue (Hotel) 2,694,395 3,741,024 4,483,036 4,828,136 6,022,799 6,061,178 4,456,749 6,061,178 6,364,237 6,682,449 Operating Income (OI): -
Total Room Revenue (net S.C.) 2,694,395 3,741,024 4,483,036 4,828,136 6,022,799 6,061,178 4,456,749 6,061,178 6,364,237 6,682,449
Service charges 134,720 187,051 224,152 241,407 301,140 303,059 222,837 303,059 318,212 334,122
Room Revenue 2,829,115 3,928,075 4,707,188 5,069,543 6,323,939 6,364,237 4,679,586 6,364,237 6,682,449 7,016,571
Food & Beverage 785,865 1,335,971 2,137,553 2,458,186 2,826,914 2,968,260 2,968,260 2,968,260 3,116,673 3,272,506
Other Dept Income 314,346 534,388 694,705 764,175 878,802 922,742 922,742 922,742 968,879 1,017,323
Gross Operating Revenue (GOR) 3,929,326 5,798,434 7,539,446 8,291,905 10,029,654 10,255,239 8,570,588 10,255,239 10,768,000 11,306,400
EXPENSES
Department Cost & Expenses
Hotel Rooms 509,241 636,551 732,033 732,033 768,635 807,067 847,420 889,791 934,281 980,995
Food & Beverage 510,812 740,678 814,746 814,746 855,483 898,257 943,170 990,328 1,039,845 1,091,837
Other Operating Expenses 204,325 275,839 317,214 317,214 333,075 349,729 367,215 385,576 404,855 425,098
Total Cost of Sales 1,224,378 1,653,067 1,863,994 1,863,994 1,957,193 2,055,053 2,157,806 2,265,696 2,378,981 2,497,930
Department Gross Income
Hotel Rooms 2,319,874 3,291,524 3,975,154 4,337,510 5,555,304 5,557,170 3,832,166 5,474,446 5,748,168 6,035,577
Food & Beverage (Restaurant & Banquet) 275,053 595,293 1,322,808 1,643,441 1,971,431 2,070,003 2,025,090 1,977,931 2,076,828 2,180,669
Other Dept Income 110,021 258,550 377,490 446,961 545,726 573,013 555,526 537,165 564,024 592,225
Total Gross Income (Dep Profit) 2,704,948 4,145,367 5,675,452 6,427,911 8,072,461 8,200,186 6,412,782 7,989,543 8,389,020 8,808,471
Undistributed Operating Expenses
Sales & Marketing 235,760 202,945 223,240 245,564 282,398 296,518 311,344 326,911 343,257 360,420
Administrative and General (inc. "others") 550,106 579,843 666,820 733,502 880,202 924,212 970,423 1,018,944 1,069,891 1,123,386
Property Operation & Maintenance 78,587 144,961 159,457 175,403 228,023 239,425 1,197,123 239,425 251,396 263,966
Energy Cost 255,406 347,906 400,092 440,101 528,121 554,527 582,254 611,367 641,935 674,032
Total Undistributed Expenses 1,119,858 1,275,656 1,449,609 1,594,569 1,918,745 2,014,683 3,061,144 2,196,647 2,306,479 2,421,803
Gross Operating Profit 1,585,090 2,869,711 4,225,843 4,833,342 6,153,716 6,185,503 3,351,638 5,792,896 6,082,541 6,386,668
Basic Management Fee (on GOR) 78,587 115,969 150,789 165,838 200,593 205,105 171,412 205,105 215,360 226,128
Provision for FFE (on GOR) 117,880 173,953 150,789 165,838 200,593 205,105 171,412 205,105 215,360 226,128
Incentive Management Fee (on GOR) 79,255 143,486 211,292 241,667 307,686 309,275 167,582 289,645 304,127 319,333
Other non Op costs (inc insurance) 39,293 57,984 75,394 82,919 100,297 102,552 85,706 102,552 107,680 113,064
Mgt Fee and Other Expense Sub-total 315,014 491,392 588,264 656,262 809,168 822,037 596,111 802,407 842,527 884,653
Net Operating Profit (EBITDA) 1,270,076 2,378,320 3,637,579 4,177,079 5,344,547 5,363,466 2,755,527 4,990,489 5,240,014 5,502,015
Developer Share 1,079,565 2,021,572 3,091,942 3,550,518 4,542,865 4,558,946 2,342,198 4,241,916 4,454,012 4,676,712
Share 190,511 356,748 545,637 626,562 801,682 804,520 413,329 748,573 786,002 825,302
8.3 Residential Rental Cash FlowInvestment Feasibility Analysis and Development Recommendations Sample
1 2 3 4 5 6 7 8 9 10
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Development Status Soft Opening Start Up Start Up Stabilization Renovation
Apartment Component
Number of Units 24 24 24 24 24 24 24 24 24 24
Occupied Rooms/Room Sold 144 244 259 244 230 230 230 230 230 230
Annual Room Available 287 287 287 287 287 287 287 287 287 287
Room Occupancy 50% 85.0% 90.0% 85.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0%
Average Monthly Rate (AMR) 1,600 1,680 1,764 1,940 1,940 2,037 2,139 2,246 2,359 2,476
RevPar 800 1,428 1,588 1,649 1,552 1,630 1,711 1,797 1,887 1,981
REVENUES
Room Revenue (Apartment) 229,824 410,236 456,086 473,822 445,950 468,248 491,660 516,243 542,056 569,158 Operating Income (OI): -
Total Room Revenue (net S.C.) 229,824 410,236 456,086 473,822 445,950 468,248 491,660 516,243 542,056 569,158
Service charges 11,491 20,512 22,804 23,691 22,298 23,412 24,583 25,812 27,103 28,458
Room Revenue 241,315 430,748 478,890 497,514 468,248 491,660 516,243 542,056 569,158 597,616
Food & Beverage 28,390 42,585 55,361 63,665 73,214 76,875 76,875 84,563 88,791 93,230
Other Dept Income 14,195 21,293 27,680 30,448 35,016 36,766 36,766 40,443 42,465 44,588
Gross Operating Revenue (GOR) 283,900 494,625 561,931 591,626 576,478 605,302 629,885 667,061 700,414 735,435
EXPENSES
Department Cost & Expenses
Hotel Rooms 24,132 36,197 41,627 41,627 43,708 45,894 48,188 50,598 53,128 55,784
Food & Beverage 18,454 26,758 29,433 29,433 30,905 32,450 34,073 35,776 37,565 39,444
Other Operating Expenses 9,227 12,456 14,325 14,325 15,041 15,793 16,582 17,412 18,282 19,196
Total Cost of Sales 51,812 75,411 85,385 85,385 89,654 94,137 98,844 103,786 108,975 114,424
Department Gross Income
Hotel Rooms 217,184 394,550 437,263 455,887 424,540 445,767 468,055 491,458 516,031 541,832
Food & Beverage (Restaurant & Banquet) 9,937 15,827 25,927 34,231 42,309 44,425 42,802 48,786 51,225 53,787
Other Dept Income 4,968 8,836 13,356 16,124 19,975 20,974 20,184 23,031 24,183 25,392
Total Gross Income (Dep Profit) 232,088 419,214 476,546 506,242 486,824 511,165 531,041 563,275 591,439 621,011
Undistributed Operating Expenses
Sales & Marketing 2,839 4,946 5,441 5,985 6,284 6,598 6,928 7,275 7,639 8,020
Administrative and General (inc. "others") 14,195 24,731 28,441 31,285 31,285 32,849 34,492 36,216 38,027 39,929
Property Operation & Maintenance 5,678 9,893 10,882 11,970 13,765 14,454 72,268 14,454 15,176 15,935
Energy Cost 5,678 9,893 11,376 12,514 13,140 13,797 14,487 15,211 15,971 16,770
Total Undistributed Expenses 28,390 49,463 56,140 61,754 64,474 67,698 128,175 73,156 76,813 80,654 Gross Operating Profit 203,698 369,752 420,406 444,488 422,349 443,467 402,866 490,120 514,626 540,357
Basic Management Fee (on GOR) 5,678 9,893 11,239 11,833 11,530 12,106 12,598 13,341 14,008 14,709
Provision for FFE (on GOR) 5,678 14,839 11,239 11,833 11,530 12,106 12,598 13,341 14,008 14,709
Incentive Management Fee (on GOR) 10,185 18,488 21,020 22,224 21,117 22,173 20,143 24,506 25,731 27,018
Other non Op costs (inc insurance) 2,839 4,946 5,619 5,916 5,765 6,053 6,299 6,671 7,004 7,354
Mgt Fee and Other Expense Sub-total 24,380 48,165 49,117 51,806 49,941 52,438 51,638 57,859 60,752 63,790
Net Operating Profit (EBITDA) 179,318 321,587 371,289 392,682 372,408 391,029 351,229 432,261 453,874 476,567
hare 161,387 289,428 334,160 353,414 335,167 351,926 316,106 389,035 408,486 428,911
Developer Share 17,932 32,159 37,129 39,268 37,241 39,103 35,123 43,226 45,387 47,657
182014
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8.4 Consolidated Cash FlowMezzanine Investment Decision
Investment Feasibility Analysis and Development Recommendations Sample
• The resulting NPV is positive (at discount rate of 20%) and the IRR indicate a positive expected returns of 21.33%.
• If management fee (base fee and incentive fee) is taken into account, the investment could have positive NPV and the
IRR indicate a positive expected return of 24.9%
Investment Decision Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11
Initial Investment (Hotel) 0 0 (1,500) (1,500) 0 0 0 0 0 0 0 0
Initial Investment (Residential) 0 0 (1,045) (1,045) 0 0 0 0 0 0 0 0
Initial Investment (Residential fitting out) 0 0 0 (480) 0 0 0 0 0 0 0 0
Hotel Cash Flow ( 25% of Net Profit) 0 0 0 0 318 89 404 539 831 835 183 12,782
Rental Net Revenue 0 0 0 0 161 289 334 335 352 316 389 429
Residential Sale(10.5% cap rate) 0 0 0 0 0 0 0 0 0 0 0 4,085
Loan Use 0 0 0 0 0 0 0 0 0 0 0 0
Residential Sale(10.5% cap rate) 0 0 0 0 0 0 0 0 0 0 0 0
Annual Debt Service 0 0 0 0 0 0 0 0 0 0 0 0
Total Cash Flows Net to Mezzanine Lender 0 0 (2,545) (3,025) 479 379 738 874 1,183 1,152 573 17,295
Cumulative Cash Flow 0 0 (2,545) (5,569) (5,090) (4,711) (3,973) (3,099) (1,917) (765) (192) 17,103
Discount Factor @ 20% Mezz Hurdle Rate 1.00 0.9595 0.80 0.66 0.55 0.46 0.38 0.32 0.27 0.22 0.19 0.15
Discounted Cash Flow 0 0 (2,026) (2,007) 265 174 283 280 315 256 106 2,669
NPV @ 20% 316 = Sum of discounted cash flow
ROE ( Excluding management fee) 21.33%
Base Fee 79 116 151 166 201 205 171 205
Incentive Fee 79 143 211 242 308 309 168 290
Total Management Fee 0 0 0 158 259 362 408 508 514 339 495
Total Cash Flows Net to Mezzanine Lender 0 (2,545) (3,025) 637 638 1,100 1,282 1,691 1,666 912 17,790
Cumulative Cash Flow 0 0 (2,545) (5,569) (4,932) (4,294) (3,194) (1,912) (221) 1,445 2,356 20,146
Discount Factor @ 20% Mezz Hurdle Rate - 0.9595 0.7962 0.6635 0.5529 0.4608 0.3840 0.3200 0.2666 0.2222 0.1852 0.1543
Discounted Cash Flow 0 0 (2,026) (2,007) 352 294 422 410 451 370 169 2,745
NPV 1,181 = Sum of discounted cash flow
IRR (including management fee) 24.90%
Unit: $1,000
19
2014
9.0 ConclusionInvestment Feasibility Analysis and Development Recommendations Sample
20
Thank You
Disclaimer: This document has been prepared in good faith and for general informational purposes only. Nothing herein contains investment, legal, tax
and/or other advice and investors should seek independent professional advice before making any investment decision. While reasonable care has been
taken to ensure that the sources of information herein are reliable, no guarantee is provided to the accuracy or completeness of such information (and
the same may not be independently verified or audited) and no liability is accepted for any inaccuracy or omission.