This assignment in Financial Management deals with capital budgeting and target calculation of public fees. By using dynamic methods of capital budgeting, the amortization of a restoration project of an existing derelict mausoleum on a historic cemetery in Berlin-Schoeneberg is calculated. The conversion into a columbarium generates a cash flow, which equals the project´s expenses after a defined period of time. The question, how high a convenient usage fee for the rental of urn niches in the columbarium would be, is answered in this assignment.
Table of Contents
List of Figures
List of Tables
Executive Summary
1 Introduction
2 Conversion of a Mausoleum Into a Columbarium
2.1 Present Situation
2.2 Future Situation
2.3 Project Costs
2.4 Project Cash Flows
3 Dynamic Method of Target Calculation
3.1 Methodology of Net Present Value Analysis
3.2 Determinants for Project Calculation
3.3 Calculation of the Project Net Present Value
3.3.1 Present Usage Fees
3.3.2 Targeting of Usage Fees
4 Conclusion
Bibliography
List of Figures
Fig. 1: Mausoleum Schultze – Front View
Fig. 2: Mausoleum Schultze – Interior View
Fig. 3: Project Sketch of Urn Niches – Columbarium Holy Heart of Jesus, Hannover
Fig. 4: Project after Completion – Columbarium Holy Heart of Jesus, Hannover
Fig. 5: Historical Sketch (Floor Plan) of Schultze Mausoleum
Fig. 6: Project Sketch (Floor Plan) of the Columbarium
Fig. 7: Related Future Cash Flow of the Columbarium
Fig. 8: NPV Calculation and Its Annual Cash Flows
List of Tables
Table 1: Formula of Net Present Value
Table 2: Compounded Future Cash Flow of the Columbarium (Fee: 33.00 €)
Table 3: NPV Calculation of the Columbarium (Fee: 33.00 €)
Table 4: Compounded Future Cash Flow of the Columbarium (Fee: 63.00 €)
Table 5: NPV Calculation of the Columbarium (Fee: 63.00 €)
Executive Summary
This assignment in Financial Management deals with capital budgeting and target calculation of public fees. By using dynamic methods of capital budgeting, the amortization of a restoration project of an existing derelict mausoleum on a historic cemetery in Berlin-Schoeneberg is calculated. The conversion into a columbarium generates a cash flow, which equals the project´s expenses after a defined period of time. The question, how high a convenient usage fee for the rental of urn niches in the columbarium would be, is answered in this assignment.
1 Introduction
The Old St.-Matthew´s Cemetery in Berlin-Schoeneberg was founded in 1856. It is one of Berlin´s most significantly listed graveyards, with more than 60 graves of very important personages, for example the brothers Jacob and Wilhelm Grimm, the doctor and politician Rudolf Virchow, the educationalist Adolf Diesterweg and the composer Max Bruch. Many impressive grave architectures and sculptures are of considerable artistic value, created by architects and artisans of the Prussian Empire.
A neo-baroque masterpiece made of bricks and natural stone masonry is the mausoleum[1]
of Julius Wilhelm Schultze and his familiy. Schultze, who died in 1906, was a lottery entrepreneur and the owner of a wine wholesale company. He got the nickname “Millionen-Schultze”, because he got extremely rich by property sale in the fast growing city of Berlin of the late 19th century. Schultze could afford this huge chapel-like mausoleum, in which he was buried. Since World War II, nobody has taken care of the mausoleum. Recently the building is in ruins, without a sufficient rooftop or facade, windows or a door.
The cemetery administration of the Protestant Parish of Twelve Apostles in Berlin, who nowadays is in charge of the Old St.-Matthew´s Cemetery, is not able to finance the restoration of the Schultze mausoleum without generating future cash flows financing these construction costs. The project idea is to restore the mausoleum and to convert the interior into a columbarium[2].
The columbarium will consist of many urn niches, where the cremated human remains will take place for a defined period of time. Since the cemetery sells the rights of use of these urn niches in the case of future burials, proceeds can be realized. With these revenues the restoration and further maintenance costs of the mausoleum should be financed.
The assignment deals with the topics of capital budgeting and target calculation. Answers will be given to the following questions:
- What are the overall costs for restoring the historical building and for the conversion into a columbarium and its maintenance?
- Which is the forecasted demand of future urn burials in the columbarium?
- What are the determinants which generates future cash flows?
- At which point does the forecasted future cash flow equalize the costs of the restoration project?
- What are the required fees for a single burial regarding a reasonable amortization rate of the project?
Precondition to the target calculation of this project is, that opportunity costs as well as external benefits are not considered in the calculation.
2 Conversion of a Mausoleum into a Columbarium
2.1 Present Situation
The mausoleum is constructed by bricks. Additional parts of the masonry are made by sandstone and granite. The mausoleum consists of a hall, a basement and a roof with a central dome. The roof panels are made by copper. The door and the window frames are cast-iron. The derelict chapel-like mausoleum, designed by Berlin architect Albert Bohm in 1906, suffers from leakage in the roof, rainwater access and corrosion of its metal construction parts.
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Fig. 1: Mausoleum Schultze – Front View
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Fig. 2: Mausoleum Schultze – Interior View
Old St.-Matthew´s Cemetery is a historical garden monument protected by state preservation law and registered in the Berlin monuments list. The mausoleum, as a part of the cemetery, is protected in the same way. The Berlin historical preservation act commits the Protestant Parish of Twelve Apostles, as the owner of the cemetery, to preserve the building up to an economically reasonable level. Since there is a large number of abandoned grave architecture on the cemetery and the cemetery fees do not cover preservation costs in general, the owner is not able to preserve all the protected building structures. Therefore subsidies up to 50% of the additional restoration costs are offered by the monument preservation agency to those property owners who initiate to restore their historic monuments.
2.2 Future Situation
The intention of the cemetery administration is to restore the derelict mausoleum in a historical proper way and to convert the interior of the mausoleum into a columbarium, where niches are offered to store the cremated remains of a deceased person in an urn.
This conversion of abandoned cemetery buildings, chapels and even churches is a common method to use the wasted space for burial reasons. On Old St.-Matthew´s Cemetery, a small mausoleum was converted to a columbarium in the early 1990´s and an outside wall of urn niches was established in the 1980´s. Both facilities were accepted by the clients and do not provide free places anymore. An example for a conversion of the abandoned Catholic Church of the Holy Heart of Jesus into a columbarium in Hannover, Germany, is shown in the figures below.
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Fig. 3: Project Sketch of Urn Niches – Columbarium Holy Heart of Jesus,
Hannover (Source: Kath. Pfarrgemeinde St. Martin Hannover-Ost, 2010)
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Fig. 4: Project after Completion - Columbarium Holy Heart of Jesus,
Hannover (Source: Kath. Pfarrgemeinde St. Martin Hannover-Ost, 2010)
Regarding the floor plan of the Schultze mausoleum, the projected columbarium on Old St.-Matthew´s Cemetery may consists of two types of urn niches:
Standard niches:
- total supply: 300 niches (40 cm wide)
- maximum capacity: ca. 750 urns (2-3 urns in each niche, depending on the size)
- coverage: 450 urns (average 1.5 urns in each niche)
[...]
[1] A mausoleum is an external free-standing building constructed as a monument enclosing a burial chamber of a deceased person or persons. The name “mausoleum” dates back to King Mausolus, the Persian satrap of Caria, whose large tomb, the Mausoleum of Halicarnassus (near modern-day Bodrum in Turkey was one of the Seven Wonders of the Ancient World.
[2] A columbarium is a place for the respectful and usually public storage of urns, holding a deceased’s cremated remains. The term comes from the Latin columba (dove) and originally referred to compartmentalized housing for doves.