Eco Assignment – Melon Enterprise Essay

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ECO Assignment – Melon Enterprise Click Link Below To Buy: Melon Enterprise is a commercial real estate developer. You recently joined Melon and your position reports directly to Pat Smith, the CEO. When you meet Pat for the first time, she asks you to work on a project that has to be completed in about a week. Pat tells you that Melon is thinking about leasing a parcel of land to build a shopping center. Melon would own and operate the shopping center and generate revenue by renting space to retailers. Pat would like you to do some work on the project. Specifically, she would like you to complete the following tasks: 1. Determine the optimal size of the shopping center…show more content…
•Bob thought that the parcel of land would be large enough to build a shopping center with as much as 60,000 square meters of retail space. He also thought that Melon should make a one time upfront payment to lease the parcel of land for the expected 20-year life of the project. •Bob thought the amount retailers in the shopping center would be willing to pay per square meter of floor space would be a decreasing function of the total size of the shopping center. Bob did some initial work estimating the likely relationship between what tenants would be willing to pay for retail space and the size of the shopping center. Specifically, he thought there was a 50% chance the true relationship would be: r = 60 - 0.001s and a 50% chance that the true relationship would be r = 50 - 0.001s where r is the rental rate per square meter of floor space and s is the total size of the shopping center in square meters. Furthermore, Bob was going to assume that once the shopping center had been built, the realized relationship between r and s would remain unchanged for the next 20 years. •Bob was planning to ignore discount rates and the time value of money in his initial evaluation of the project. He was going to treat all of the project’s costs and benefits equally no matter when they occurred in the life of the project; that is, he was going to treat a $1 cost incurred (or revenue

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