A large oil company has been invited to get involved in a project to build a parking facility in the centre of Frankfurt. The project includes a 450-car public parking lot, a 200-car garage and a petrol station covering 1,000m2. It will take 1 year to build, and a 30-year concession to run the facility will be granted by the municipality (after construction has been completed). Total capital expenditure will be € 8,400,000 and working capital will be nil. The annual income statement for the project after the construction looks like this:
|
Charges |
Revenues |
||
|
Operating |
670,000 |
Parking places |
1,680,000 |
|
Depreciation and amortisation |
280,000 |
Garage |
770,000 |
|
Income tax expense |
1,000,000 |
Petrol station |
800,000 |
|
Net profits |
1,300,000 |
||
|
3,250,000 |
3,250,000 |
||
Calculate the average accounting return on the project, the payback ratio, the net present value at 10% and the internal rate of return. Is the average accounting return equal to the average of the annual returns on the project?