Tiger Towers, Inc. is considering an expansion of their existing business, student apartments. The new project will be built on some vacant land that the firm has just contractedto buy. The land cost $1,000,000 and the payment is due today. Construction of a 20-unit office building will cost $3 million; this expense will be depreciated straight-line over30 years to zero salvage value; the pretax value of the land and building in year 30 will be $18,000,000. The $3,000,000 construction cost is to be paid today. The project willnot change the risk level of the firm. The firm will lease 20 office suites at $20,000 per suite per year; payment is due at the start of the year; occupancy will begin in one year.Variable cost is $3,500 per suite. Fixed costs, excluding depreciation, are $75,000 per year. The project will require a $10,000 investment in net working capital.rdebt = 10.0%WACC = 11.20% Drasset = 15.0% tax rate = 34%requity = 24.9% rfree = 2%What is the unlevered after-tax incremental cash flow for year 30?Multiple Choice$12,332,300$12,225,390$12,432,300= 3$12,485,000

Here,Value of Land $ 1,000,000.00No.of Office Suites20Revenue per Suites $…

Answered: Tiger Towers, Inc. is considering an…

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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