Question
1.A real estate developer plans to construct and then rent a 15-unit office building. The construction costs will be incurred immediately and are expected to
1.A real estate developer plans to construct and then rent a 15-unit office building. The construction costs will be incurred immediately and are expected to be $650. The annual cash flow on all units is expected to be $110 starting in one year and continuing for a total of 3 consecutive years. Calculate the profitability index for the office building using a required rate of return of 7.950%. Your answer should be in the form of a number and should not include a percentage sign. For this calculation it is best to include more than 2 decimal points, such as an answer of 0.935 instead of 0.93 or 0.94.
2.A research division of a large consumer electronics company has developed a new type of mp3 player. The project will require an immediate cash outflow of $1,665,321. The new project is expected to produce cash flows of $500,000 per year for 4 consecutive years beginning at the end of year one. What is this projects internal rate of return? Place your answer in percentage form without the percent sign. For example, if your answer is four point seven two percent, you should enter your answer as 4.72 and not as .0472 or as 4.72%.
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