You are an engineering company with a track record in design and construction

of multi-storey car-park facilities. A university has approached you with a

possible opportunity to finance, build, own and operate a new car-park facility
on terms of a 20 year concession period.

Information available from the client is summarised as follows:

 The existing car parking arrangements comprise 300 on grade spaces for
customers. These are inadequate for the client, and due to growth
predictions a multi-level car parkof 1,200 spaces is required.
 Project is located in Auckland NZ.
 Academic year is split into 40 weeks of teaching and 12 weeks of
holiday.
 Number of staff = 700 (constant all year round).
 Number of students = 5,500 during term time and = 1,000 during holiday
times.
 A recent survey of students and staff indicates that a parking charge of
approximately $3.00 per hour would be acceptable.
 No funds are available from the client for the development of support
infrastructure such as car parking. However the client is prepared to enter
a long term lease for land already owned by the them at a peppercorn rent
of $1 per annum. At the end of the 20 concession period the ownership of
the car-park building is transferred to the University for a pre-agreed sale
price of $1.
 Under the Build / Own / Operate / Transfer arrangement the company
collects all revenues and is liable for all risks and costs associated with
the car-park facility.
 Client is open to suggestions for project innovations.

Following an initial discussions with the client you determine that the following
assumptions are reasonable:

Occupancy Assumed Times Estimated Occupancy Level

profiles

Weekday profile Weekend Profile

Term Holiday Term Holiday

Day 9am- 5pm 75% 60% 40% 30%

Evening 5pm- 9pm 60% 40% 30% 20%

Night 9pm-9am 5% 0% 0% 0%
The client confirms that there is also potential revenue from parking fines. The client prefers
a pay and display method of ticketing (i.e. no entry/exit barriers). The client would be
agreeable to a fine of approximately $60 for failing to display a ticket. It is estimated that
approximately 2% of users would not pay and display their tickets, of which fines would be
successfully collected from 15% of defaulters.
From your expertise in building, owning and operating car-parks in New Zealand you collect
the following data:

PROJECT CAPEX ESTIMATES Rate Estimates

Number of spaces N0 1200

Area per park m2 27.5

Area of parking m2 33,000

Construction cost per m2 parking $/m2 $1,200

Professional fees (%) % 10%

Other costs
consents item $200,000

Legal Costs item $200,000

Development levy item $600,000

Major refurb cost allowance in Yr 10 item $2,000,000

OPEX ESTIMATES Estimates

General Operating costs for the car park per annum $100,000
(excl GST)

Salary Costs (Car-park attendants-part time) per $50,000

annum (incl GST)
Head office overheads (incremental) per annum (excl $10,000
GST)
Initial working capital required (inc GST) $100,000
 ADDITIONAL INFORMATION Estimates
Revenue and cost inflation rate 3:50%

Tax rate 30.0%

Required rate return on equity Cost of debt 20.0%

Maximum Debt Funding available from bank 9.0

GST rate 15%

Your company has recently spent $1,200,000 researching and developing a new
type of re-useable floor formwork. This work is not yet complete and is
estimated to cost a further
$500,000 to bring to successful competition. There is a 50% chance that the
research and development will be complete in time to implement for this
project. If successful it is estimated will save 1% to 2% of the construction costs
for all future car park projects constructed by your company. The company uses
a straight line depreciation method. The design and construction time period for
the car-park is estimated to be 12 months from start to completion.

1. Complete a NPV analysis for the project using all the information available.
2. Prepare the analysis using a spread sheet (MS Excel). Clearly label the
columns and rows in the spread sheet and provide sufficient annotation to
illustrate your logic and methods of analysis.
3. Prepare a cumulative NPV chart (plotting NPV against years), showing the
NPV break-even point