STION. A commercial real estate developer is considering several options for developing a piece of property. The initial investment required for each opportunity, along with the expected cash flow at the end of the first year, the growth rate of the concen, and the o of capital associated with each project is shown below: Initial Investment PROJECT Coffee Shop CF at end of Year 1 Growth in CF Cost of Capital $740,000 $460,000 $1,220,000 $060,000 $84,000 2.0% 12.0% Clothing Store Convenience Store Bike Shop $56, 100 $06,900 $92,800 3.0% 14.0% 4.0% 11.0% 5.0% 13.0% It is assumed each investment will operate in perpetuity after the initial investment. Question 1: Which investment opportunity should the investor choose: O A. Coffee Shop OB. Clothing Store Oc. Convenience Store D. Bike Shop Question 2: The commercial real estate developer just received an offer from someone interested in purchasing the undeveloped property. The offer to purchase the property was for $180,000. Does this alter the decision made in question #1 above? O A Yes. The choice made in Question #1 is no longer the most attractive option. O B. No. My decision from Question #1 is still the most attractive option.
STION. A commercial real estate developer is considering several options for developing a piece of property. The initial investment required for each opportunity, along with the expected cash flow at the end of the first year, the growth rate of the concen, and the o of capital associated with each project is shown below: Initial Investment PROJECT Coffee Shop CF at end of Year 1 Growth in CF Cost of Capital $740,000 $460,000 $1,220,000 $060,000 $84,000 2.0% 12.0% Clothing Store Convenience Store Bike Shop $56, 100 $06,900 $92,800 3.0% 14.0% 4.0% 11.0% 5.0% 13.0% It is assumed each investment will operate in perpetuity after the initial investment. Question 1: Which investment opportunity should the investor choose: O A. Coffee Shop OB. Clothing Store Oc. Convenience Store D. Bike Shop Question 2: The commercial real estate developer just received an offer from someone interested in purchasing the undeveloped property. The offer to purchase the property was for $180,000. Does this alter the decision made in question #1 above? O A Yes. The choice made in Question #1 is no longer the most attractive option. O B. No. My decision from Question #1 is still the most attractive option.
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
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