Challenge #5
This is a finance one, years ago you invested in 7 acres of land at the edge of town with the
thought of expanding your business on the property sometime in the future. In the years since
you bought the property the city expanded around your acres and now you see an opportunity
to sell your property. You have also started a different building project that you do not have
fully funded and will need to borrow money unless you are able to sell the property on the
edge of town.
The building project is being done over several years and has a $19,000,000 price tag. You have
secured 12 million so far, can restructure another 2 million dollars with internal borrowing, but
are counting on 5 million from the sale of the land to avoid borrowing that amount. You have
not received any offers for the full amount but have received offers around 3 million but feel
that is far below the value of the land and you do not want to give it away. At some point you
will need to borrow the 5 million as the project is completed early in 2023. You estimate a
business loan will have an interest rate of around 6 percent annually. Prepare a business
proposal using financial functions like pmt or fv to predict when you would be better off taking
a low offer (Scenario Manager might be a good tool) rather than waiting for the land to sell at
your asking price. You should show what the loan is going to cost over time vs. what it would
cost if you took a lower offer would suggest you model it based on a sale of both 3 million
and 4 million. Charts/graphs along with payment plans showing interest and principal over
time to help me understand when it starts costing more to wait for the full offer vs. taking a
lower offer now. If you think you can secure a lower interest loan you could show the costs
based on lower (or higher) rates as well.
50 points possible

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