An investor is considering purchasing an office building for $5 million with the intention of renting it out. Six months after purchase the investor will spend $0.5 million on necessary refurbishments and improvements. A tenant has agreed to lease the building in one year's time for 20 years. The tenant will pay an initial rent of $0.75 million per annum payable quarterly in advance. The rent will be increased at two-yearly intervals at a rate of 2.0% per annum compound. It has further been agreed that at the end of the lease period the tenant will buy the building from the investor for $10 million. Which of the following is the discounted payback period for this project using a rate of return of 6.0% per annum effective? 10.0 years 10.25 years 10.33 years 10.5 years 10.67 years 10.75 years 10.83 years 11.0 years 11.08 years 11.17 years
An investor is considering purchasing an office building for $5 million with the intention of renting it out. Six months after purchase the investor will spend $0.5 million on necessary refurbishments and improvements. A tenant has agreed to lease the building in one year's time for 20 years. The tenant will pay an initial rent of $0.75 million per annum payable quarterly in advance. The rent will be increased at two-yearly intervals at a rate of 2.0% per annum compound. It has further been agreed that at the end of the lease period the tenant will buy the building from the investor for $10 million. Which of the following is the discounted payback period for this project using a rate of return of 6.0% per annum effective? 10.0 years 10.25 years 10.33 years 10.5 years 10.67 years 10.75 years 10.83 years 11.0 years 11.08 years 11.17 years
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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An investor is considering purchasing an office building for $5 million with the intention of renting it out. Six months after purchase the investor will spend $0.5 million on necessary refurbishments and improvements.
A tenant has agreed to lease the building in one year's time for 20 years. The tenant will pay an initial rent of $0.75 million per annum payable quarterly in advance. The rent will be increased at two-yearly intervals at a rate of 2.0% per annum compound. It has further been agreed that at the end of the lease period the tenant will buy the building from the investor for $10 million. Which of the following is the discounted payback period for this project using a |
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