Question

As a final consideration an investment equity proposal from Double Dragon for their Iloilo City project called Hotel101 for a Php4.5 million per unit on the 300-room hotel, with a discount of 20% per unit for a minimum of 10 unit paid in cash. The projected ROI is within 3.5 years with a projected rental income of Php25,000 per unit at 15% room capacity. It's projected to be finished in 2 or 3 years' time with a projected increase in land value of 3% annually.

Given these facts answer the following questions:
How much are the available funds for investment purposes and how would you allocate the funds based on the best risk assessment?

Answer 1

The available funds for investment purposes are Php45 million. It is best to allocate the funds in a diversified manner based on the projected ROI, rental income, and projected increase in land value.

Step-by-step explanation:

The available funds for investment purposes would be Php4.5 million per unit, with a 20% discount per unit for a minimum of 10 units paid in cash. Therefore, the total available funds would be:

Php4.5 million x 10 units = Php45 million

To allocate the funds based on the best risk assessment, it is important to consider the projected ROI, rental income, and projected increase in land value.

Based on the information provided, the projected ROI is within 3.5 years, and the projected rental income per unit is Php25,000 at 15% room capacity. It is also projected to have a 3% annual increase in land value.

With these factors in mind, it would be wise to allocate the funds in a diversified manner. For example, a portion of the funds can be used to invest in the Hotel101 project, while another portion can be allocated to other investments with potentially lower risk but still provide a decent return.