CHICAGO PARKING METERS LLC
The presenting group clearly explains the situation and the parties involved.
1. Compare the perspectives of private investors and municipalities in valuing revenue streams in the CPM analysis. Where do they differ and where do they have common ground? a. Difference- The private investors use cash flow, account for taxes, and they will pay for the investment. The municipalities use revenues, don’t account for taxes, and they won’t pay for the investment. b. Common- They both would use the same discount rates, inputs, and the same rate of inflation. 2. Run the analysis from the standpoint of CPM, LLC. Assume that meter pricing goes up according to the schedule in Table 1 through 2013 and then by 3% thereafter until the end of the lease. Use the revenue allocation scheme in Table 2 to project sources of revenue from the different zones. Note: create your own version of Table 2 with the data since Table 2 data is rounded and will lead to slightly different outcomes. Depreciation on the installation of parking stations will be over 5 years straight line for each $10 million invested and will be incurred each time meters are upgraded. Assume CPM will replace parking stations every 10 years beginning in 2019 with prices of replacement stations impacted by inflation (3% per year) and costs allocated across three years as was the case in the 2009-2011 initial installation. Other operating expenses are 15% initially and compliance is 75%; a compliance rate that produces the figures in Table 2. Calculate cash flows per year for the entire life of the lease assuming tax rate of 35%. Other:
For parking meter rates this does not begin until after allowed price hikes are put in place so first year to “inflate” is 2014. For meter purchases inflation impacts those costs beginning ’09 (2010 year is first inflated year) even for first round of upgrades. It doesn’t affect 3 payments beginning in ’09 since those...
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