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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($)

Net profit per year

A

Apartment house

300,000

69,000

B

Theater

200,000

40,000

C

Department store

250,000

55,000

D

Office building

400,000

76,000

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?.

D

B

C

A

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