A shopping center costing $20,000,000 will have an estimated net annual income of $2,000,000. In 10 years it is estimated the center can be sold for $15,000,000.

(a) What is the expected rate of return?

(b) Is it profitable to sell the shopping center in 10 years? Why?

Use the tables below.

n = 1,

	P/F	P/A	A/F	A/P	F/P	F/A
i = 5 %	0.95238	0.9523	1.00000	1.05000	1.0500	1.0000
i = 7 %	0.93458	0.9345	1.00000	1.07000	1.0700	1.0000
i = 9 %	0.91743	0.9174	1.00000	1.09000	1.0900	1.0000
i = 11 %	0.90090	0.9009	1.00000	1.11000	1.1100	1.0000

n = 10,

	P/F	P/A	A/F	A/P	F/P	F/A
i = 5 %	0.61391	7.7217	0.07950	0.12950	1.6288	12.577
i = 7 %	0.50835	7.0235	0.07238	0.14238	1.9671	13.816
i = 9 %	0.42241	6.4176	0.06582	0.15582	2.3673	15.192
i = 11 %	0.35218	5.8892	0.05980	0.16980	2.8394	16.722