ABC Office REIT decides to buy an office building in Midtown Manhattan for $$150$ million. The company has an internal required rate of return of $10\%.$ Rental revenues for the first year of operation are projected to be $$8$ million. Operating expenses are expected to be $$3$ million in the first year and grow at $3\%$ thereafter. In addition to operating expenses, property maintenance expenses are projected to be $$250$k in the first year and is expected to grow at $3\%$ per year. Rent in NYC is very cyclical and has sagged for the last few years. With economic growth returning, it is projected that rents will rise significantly before flattening out in later years $($see revenue growth expectations below$).$ At the end of ten years, the company expects to be able to sell the asset for $$275$ million. Growth Assumptions:

Year $2345678910$

Rent Revenue Growth $10\%20\%25\%30\%20\%0\%-5\%-5\%-5\%$

Expense Growth $3\%3\%3\%3\%3\%3\%3\%3\%3\%$

i$.)$ Is this purchase good for ABC? Use the text box below to explain your answer. Hint: Use a discounted cash flow model to calculate the IRR and net present value $($NPV$)$ of the investment to help explain your answer.

Answer: