1. (25 pts) A developer has the opportunity to purchase an empty lot in downtown Memphis and is evaluating two alternative uses for the site: (a) paving it and turning it into a paid parking lot and (b) constructing a 2-story office building and leasing it out. He has assembled the following cost and revenue estimates for you:

Option A: parking lot

Initial cost ($1000s): 2,000

Annual Revenue ($1000s): 360

Salvage value ($1000s): 2,000

Option B: office building

Initial cost ($1000s): 5,550

Annual Revenue ($1000s): 820

Salvage value ($1000s): 5,550

The developer wants at least 12% per year return on his investment. Use the MIRR method to determine which option, if either, he should take. Assume a study period of 15 years.

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Name 3. (25 pts) A developer has the opportunity to purchase an empty lot in downtown Memphis and is evaluating two alternative uses for the site: (a) paving it and turning it into a paid parking lot and (b) constructing a 2-story office building and leasing it out. He has assembled the following cost and revenue estimates for you: : Initial Annual Salvage Option Site Use Cost Revenue Value ($1000s) ($1000s) ($10003) A Parking lot 2,000 360 2000 B Office building 5,550 820 5,550 The developer wants at least a 12% per year return on his investment. Use the MIRR method to determine which option, if either, he should take. Assume a study period of 15 years. Name 3. (25 pts) A developer has the opportunity to purchase an empty lot in downtown Memphis and is evaluating two alternative uses for the site: (a) paving it and turning it into a paid parking lot and (b) constructing a 2-story office building and leasing it out. He has assembled the following cost and revenue estimates for you: : Initial Annual Salvage Option Site Use Cost Revenue Value ($1000s) ($1000s) ($10003) A Parking lot 2,000 360 2000 B Office building 5,550 820 5,550 The developer wants at least a 12% per year return on his investment. Use the MIRR method to determine which option, if either, he should take. Assume a study period of 15 years