Parsa Real Estate is a company that buys and rents real estate. The company is looking into buying an office building for $1M. The building has 10,000 square feet of rentable office space. The company analysts predict that they can rent the office space for $6 per square foot per month, but demand is a function of price in the following way: % Occupied = 2 - 0.2*Rent (Rent is in dollars per square foot per month. Also, at $6.00, Oscar thinks he can fill about 80% of the office space.) The building needs to be maintained (security, insurance, maintenance, etc.), which costs $10,000 per month regardless of occupancy. Also, there is a variable cost of $2 per month for each square foot occupied. A)What is the ROIC? (Please give your answer in decimal form. For example, 0.25 for 25%) B) What would be the new ROIC be if Parsa Real Estate decides to charge rent of $8.00 per square foot per month? (Please give your answer in decimal form. For example, 0.25 for 25%)
Parsa Real Estate
Parsa Real Estate is a company that buys and rents real estate. The company is looking into buying an office building for $1M. The building has 10,000 square feet of rentable office space.
The company analysts predict that they can rent the office space for $6 per square foot per month, but demand is a function of price in the following way:
% Occupied = 2 - 0.2*Rent (Rent is in dollars per square foot per month. Also, at $6.00, Oscar thinks he can fill about 80% of the office space.)
The building needs to be maintained (security, insurance, maintenance, etc.), which costs $10,000 per month regardless of occupancy. Also, there is a variable cost of $2 per month for each square foot occupied.
A)What is the
B) What would be the new ROIC be if Parsa Real Estate decides to charge rent of $8.00 per square foot per month? (Please give your answer in decimal form. For example, 0.25 for 25%)
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