Angus Cartwright III Harvard Case Solution & Analysis

Angus Cartwright III Case Solution

Financial analysis

It is expected that each property has different investment and each investment will generate different returns. By estimating cash flows, initial investment, loan ratio, interest value over loan, net returns from each investment can be calculated. For the valuation of each property, in order to identify expected certain assumptions have been taken such as initial investment of each property, interest rate, and expected return.

It is expected that occupancy ratio of  each property is different, which depends upon the location of each property as occupancy ratio of Alison Green property is maximum among all other properties due to its favorable location. Similarly, cash on cash return ratio, capitalization rate, and increase in capital value of each property is also different.

Each property is incurring different cost, expenses, and interest expenses according to the initial investment of each property, but each property is generating positive returns as net present value of each property is positive, which means investing in each property will maximize the wealth of both cousins and will also help to diversify their investment portfolio.

It is expected that, both cousins have limited funds and each property is generating positive returns, so investing in each property is not possible due to the limitations of available funds. Therefore, identifying profitability index could help evaluate, which property is most suitable for investment purposes as with the help of profitability index, it could be identified that how much return each building generates against its investment.

For that purpose, net present value of each property is divided by its initial investment, which provides a better estimate about projected returns from each investment. It is expected that property Alison green is generating 20.4% profitability index and stone, ivy, and flower building are generating 17.27%, 11.64%, and 13.5% profitability index respectively.

From the calculations of profitability index, it is clear that the Alison Green is generating maximum returns among all other options. Therefore, it is considered as a most valuable option.

Importance of factors under the financial return

From the following assumptions, it has been determined that the value of the property would reflect against the tax and interest obligations. According to the current results, it is identified that the most important factor to consider for more earnings would be the interest element due to lower interest rates that would also decrease tax obligations over the property. Thus, Alison Green under the case would consider being the best option to evaluate; because the more controlled interest and tax payments are, more financial return would be generated in the future.

Investor’s criteria

Cash Availability

From the following analysis, it has been determined that the best option for the investors to easily manage the cash amount for the return would be the property of 900 stony walk, the internal rate of return against the availability of cash generate more results as compared to other three properties.  ...................

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