Columbia Hills East Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Columbia Hills East Case Study Solution

Arlington partnership for affordable housing (APAH) is planning to construct housing scheme for the residents of the state of Virginia; the proposed housing project is enormous and higher in terms of quality and facilities available to the tenants as compared to the previous projects of the authority.The project will be financed by a variety of loan instruments; the loan will be obtained from many sources which mainly includes bonds issued by the Virginia housing development Authority (VHDA) and several other modes of financings. In order to ensure the smooth execution of plans and to reach the desired objective, the APAH has taken many steps such as enforcing Columbia Grove to donate part of the land and obligation of VHDA to provide the finance that would be needed in the construction of the Columbia Hills East and Columbia Hills West. It can be said that Columbia Hills East project is financially viable, the internal rate of return is 1.22% and incase the marginal tax rate is reduced to 20% the IRR would be 2.40%.

Quantitative Analysis of the project:

The Columbia Hill East project seems to be feasible on the economic grounds, the IRR of the project is positive. However, the IRR is very low in case the marginal tax rate is 35%. However, if the marginal tax rate is reduced to 20%, the IRR of the project will be increased by almost 100% and will reach to approximately 2.40%.

Columbia Hills East Harvard Case Solution & Analysis

Assumptions:

The following assumptions are made in calculating the internal rate of return of the project:

All the financial projections regarding the costs and rentals are accurate and based on the realistic and reasonable assumptions.
The project will last for thirty years.
No demolishing costs would have to be incurred by APAH at the time of termination of the project.
The rentals will grow by 5% per year for the thirty years period.
Construction costs, financing costs and soft costs would have to be incurred in 2017.
The tax rate would reduce to 20% in the year 2019 and will not increase or decrease till the end of the project................

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