Entertainment Showland, one of the leading entertainment center chains in North America, decided to establish a comprehensive entertainment center in Istanbul due to its international and metropolitan character. When the cost structure of the company is analyzed, it is seen that the highest cost item consists of rent expenses. Therefore, the construction investment will be made by the company. They contacted with Cesur ?n?aat Mü?avirli?i A.?. and requested a detailed report to clarify their investment decisions in Turkey. As a result of the joint work with the entrepreneur firm, Cesur ?n?aat Mü?avirli?i A.?. has provided an analysis that will form the basis of the feasibility report for two alternative projects. • First alternative: To construct the building system as reinforced concrete. • Second alternative: To construct the building system as steel construction. 1st alternative 30 years 131 million TL 2nd alternative 40 years 164 million TL Expected lifetime Construction cost Land development cost Salvage value (at the end of the lifetime) 35 million TL 40 million TL 38 million TL 64 million TL Maintenance cost 7 million TL at the end of the 7th year 11 million TL at the end of the 13th year 5 million TL per year starting from the end of the 17th year 3.4 million TL per year 4.2 million TL per year 6.4million TL per year HVAC and fuel expenses Operating expenses Revenue 12.2 million TL per year 13.4 million TL per year 51 million TL per year 55 million TL per year As a result of the negotiations with Cesur A.?., construction of both alternatives will be completed and operation will be start at the end of the 1st year (incomes and expenses will be start at the end of the 2nd year, expected lifetime includes construction duration). A company named "International Entertainment and Show Center" has been established in Turkey for the investment. It is determined that the required investment can be made with a loan. The interest rate is the annual effective interest rate calculated in the previous question (in Question 1). For such investments, the applicable tax rate is 30% and straight line depreciation will be applied in the valuation of the investment. 3. Compare alternatives by calculating; • Present Worth (PW) analysis (by using least common multiple (LCM) method), • Annual Worth (AW) analysis, • Rate of Return (ROR) analysis. 4. In the light of the findings obtained by applying all methods, which alternative should be chosen? Or should the doing nothing alternative be chosen? All methods must be taken into account to make this decision. Please explain in detail. (80 Points)

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