1) Determination of the critical capital expenditure An investor plans the purchase of an office building with the following terms of rent (lease): Years Net rent per year 1-3 100.000,- 4-7 150.000,- 8-10 180.000,- At the end of yer 10 the buiding can be sold for 1 Mio . Determine the maximum acceptable) capital expenditure assuming that the investor plans with a calculated interest rate of 8%! 2) Determination of critical reduced costs The owner of a residential house plans to invest into an electrically powered heat pump. Reason: He wants to turn off the oil-fired central heating during the summer months (which also heats the water for domestic use) and alternatively use the heat pump. The following assumptions have to be taken into account: capital expenditure for the heat pump: 22.000.- - economic life time: 12 years - yearly payments for electricity/maintenance: 800,- - interest rate 10% - What is the required yearly minimum reduced consumption of oil (evaluated in 'money) to make the investment profitable