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Step 1: Set up base caseDemand growth as predicted, no variabilityYear0 1 2 3 19 20Demand 750 893 1,015 1,688 1,696Capacity 1,200 1,200 1,200 1,200 1,200Revenue $7,500,000 $8,930,000 $10,150,000 $12,000,000 $12,000,000Recurring CostsOperating cost $2,400,000 $2,400,000 $2,400,000 $2,400,000 $2,400,000Land leasing cost $3,600,000 $3,600,000 $3,600,000 $3,600,000 $3,600,000 $3,600,000Cash flow $1,500,000 $2,930,000 $4,150,000 $6,000,000 $6,000,000Discounted Cash Flow $1,339,286 $2,335,778 $2,953,888 $696,641 $622,001Present value of cash flow $32,574,736Capacity costs for up to two levels $6,400,000Capacity costs for levels above 2 $16,336,320Net present value $6,238,416Garage Case, etc de Neufville, Scholtes and Wang Slide 13 of 23Optimal design for base case(no uncertainty) is 6 floors10Expected NPV ($, Millions)50-5-10-152 3 4 5 6 7 8 9Number of FloorsTraditional NPVRecognizing uncertaintyGarage Case, etc de Neufville, Scholtes and Wang Slide 14 of 237