Mini Case 2021 AMAZON Leasing vs Purchase
Assignment ID Number AFFGEHU83939HD Type of Document Essay Writing Format APA/MLA/Harvard Academic Level Masters/University References/Sources 4 References
Mini Case 2021 AMAZON Leasing vs. Purchase
AMAZON WAS THE FIRST PLACE I VISITED.
1. Choose a publicly traded company headquartered in the United States that has a presence in this area or is considering doing so. (AMAZON)
2. Send me an email with your strong preference and wait for me to confirm… Each firm has only one individual or group, and the first person or group to submit a request gets the company.
3. The company should be large enough to explore leasing 107,000 square feet of office space in Broward County’s Sunrise Corporate Park or 82,500 square feet in Wynwood’s Wynwood. Because the Wynwood location features ground-floor retail, it’s likely that a company that buys the property will use it for office space. Parts of each property’s Offering Memoranda are available on the Blackboard site, and you should go through both of them before continuing with this project. Clearly, these are two quite different office locations, and your decision will be influenced by the location and style of building. To choose a firm and place, you must think carefully: defend your firm selection using at least three reasons, based on what you read in the Blackboard offering memorandum. ten (10)
a. Once you’ve located the company, calculate its cost of debt by looking up its credit rating and comparing it to the Aaa and Baa bond yields in the notes for the week of April 5th from the FRED website.
a score of 5
a. Get the firm’s beta from Yahoo Finance once you’ve located it.
c. Describe your assumptions for the cost of debt and each of the CAPM model’s three components in detail.
d. Using the CAPM 10 Points formula, calculate the needed return on equity.
5. Calculate the loan-to-value ratio for a lender willing to make the loan based on the firm’s creditworthiness. Assume the loan has a 30-year amortization period. Make use of the data from JLL’s credit market sheet. Justify your hypothesis. a score of 5
6. Calculate the land value of the property you intend to research. The Sunrise location spans 7 acres, while the Wynwood location spans 14,625 square feet. By browsing on the internet, you can find comparable properties for either location. Describe the data you used to determine the land value and the assumptions you made. ten (10)
7. For the Sunrise site, assume a triple net lease rate, and for the Wynwood location, assume a gross lease rate (with reimbursable expenses of $15 per foot). Make your assumptions based on the data on lease comps provided in each offering memorandum. Your reasoning must be explained. Use a weighted average based on similarity to the target property rather than averaging lease rates from comparables. Also, for either site, don’t rely on lease comps that are too far away from the subject property. a score of 5
8. To calculate the present value of the reversion cash flows, you must estimate an annual average appreciation rate for the next 15 years that you believe is appropriate, as well as a risk premium to add to the discount rate. Explain why you chose the risk premium and the appreciation rate. Don’t be overconfident in your appreciation rate; it’s a crucial assumption, and you can express your optimism via sensitivity analysis if you wish. ten (10)
9. If you choose the Sunrise site, you’ll also need to figure out how much it will cost to buy it. Use the Offering Memorandum’s recent sales comps to support your reasoning. If you chose the Wynwood location, assume the property can be bought for $40,000,000. Also, because the lease comps in the Wynwood Offering Memorandum are gross lease rates, not triple net lease rates, assume reimbursable expenses are $15 per square foot.
Finish the lease vs. purchase comparison. For an amortized loan, use the firm’s debt cost as the interest rate. In one study, use a tax rate of 21%, and in another, use a tax rate of 28%. You have the option of using my spreadsheet or creating your own. This will help you prepare for your final exam. ten (10)
10. Summarize your findings and advise the target company on whether to lease or purchase. (As an executive summary, include the recommendation, important assumptions, and major findings from your research on a good cover page.) Then describe your steps as you move through the mathematical analysis. 10 POINTS FOR COVERAGE
11. You don’t have to undertake any sensitivity analysis if you don’t want to, but if you do, you’ll get a lot of brownie points. However, you must state (5 points) whether you believe your conclusion is very unstable or very confident, and explain why… If you want to include sensitivity analysis, you can do so on an assumption-by-assumption basis, using goal search, best and worst case scenarios, and one or two data sensitivity tables. Here’s where you can explain your beliefs.
12. When you give in the analysis, you must print it out in presentation format. Twenty percent of the grade is based on how well you present your work. The writing style (clear, impersonal, professional, etc.) receives a score of ten out of ten.
QUALITY OF RESPONSE NO RESPONSE POOR / UNSATISFACTORY SATISFACTORY GOOD EXCELLENT Content (worth a maximum of 50% of the total points) Zero points: Student failed to submit the final paper. 20 points out of 50: The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. 30 points out of 50: The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately. Elements of the required response may also be lacking. 40 points out of 50: The essay illustrates solid understanding of the relevant material by correctly addressing most of the relevant content; identifying and explaining most of the key concepts/ideas; using correct terminology; explaining the reasoning behind most of the key points/claims; and/or where necessary or useful, substantiating some points with accurate examples. The answer is complete. 50 points: The essay illustrates exemplary understanding of the relevant material by thoroughly and correctly addressing the relevant content; identifying and explaining all of the key concepts/ideas; using correct terminology explaining the reasoning behind key points/claims and substantiating, as necessary/useful, points with several accurate and illuminating examples. No aspects of the required answer are missing. Use of Sources (worth a maximum of 20% of the total points). Zero points: Student failed to include citations and/or references. Or the student failed to submit a final paper. 5 out 20 points: Sources are seldom cited to support statements and/or format of citations are not recognizable as APA 6th Edition format. There are major errors in the formation of the references and citations. And/or there is a major reliance on highly questionable. The Student fails to provide an adequate synthesis of research collected for the paper. 10 out 20 points: References to scholarly sources are occasionally given; many statements seem unsubstantiated. Frequent errors in APA 6th Edition format, leaving the reader confused about the source of the information. There are significant errors of the formation in the references and citations. And/or there is a significant use of highly questionable sources. 15 out 20 points: Credible Scholarly sources are used effectively support claims and are, for the most part, clear and fairly represented. APA 6th Edition is used with only a few minor errors. There are minor errors in reference and/or citations. And/or there is some use of questionable sources. 20 points: Credible scholarly sources are used to give compelling evidence to support claims and are clearly and fairly represented. APA 6th Edition format is used accurately and consistently. The student uses above the maximum required references in the development of the assignment. Grammar (worth maximum of 20% of total points) Zero points: Student failed to submit the final paper. 5 points out of 20: The paper does not communicate ideas/points clearly due to inappropriate use of terminology and vague language; thoughts and sentences are disjointed or incomprehensible; organization lacking; and/or numerous grammatical, spelling/punctuation errors 10 points out 20: The paper is often unclear and difficult to follow due to some inappropriate terminology and/or vague language; ideas may be fragmented, wandering and/or repetitive; poor organization; and/or some grammatical, spelling, punctuation errors 15 points out of 20: The paper is mostly clear as a result of appropriate use of terminology and minimal vagueness; no tangents and no repetition; fairly good organization; almost perfect grammar, spelling, punctuation, and word usage. 20 points: The paper is clear, concise, and a pleasure to read as a result of appropriate and precise use of terminology; total coherence of thoughts and presentation and logical organization; and the essay is error free. Structure of the Paper (worth 10% of total points) Zero points: Student failed to submit the final paper. 3 points out of 10: Student needs to develop better formatting skills. The paper omits significant structural elements required for and APA 6th edition paper. Formatting of the paper has major flaws. The paper does not conform to APA 6th edition requirements whatsoever. 5 points out of 10: Appearance of final paper demonstrates the student’s limited ability to format the paper. There are significant errors in formatting and/or the total omission of major components of an APA 6th edition paper. They can include the omission of the cover page, abstract, and page numbers. Additionally the page has major formatting issues with spacing or paragraph formation. Font size might not conform to size requirements. The student also significantly writes too large or too short of and paper 7 points out of 10: Research paper presents an above-average use of formatting skills. The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. 10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally, the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper.
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