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A real estate investor has a 30 year lease on a plot of land. He gets estimates on the cost and income of various types
A real estate investor has a 30 year lease on a plot of land. He gets estimates on the cost and income of various types of building projects on the piece of land as follows: Building type Cost of the building(s) Net profit per year Apartment house 300,000 69,000 Theater 200,000 40,000 Department store 250,000 55,000 D Office building 400,000 76,000 B Each building type is expected to have a salvage value equal to 20% of its initial cost. If the investor requires a minimum attractive rate of return of at least 12%. Which building type (if any ) he would build
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