An office block is available for a price of million and a developer is interested in purchasing it in order to turn it into a rental property. The developer estimates that the refurbishment costs will be incurred continuously during the first four months after purchase at a rate of million per annum.

A potential tenant company has agreed to occupy and rent out the property exactly half a year after the date of purchase. The lease agreement states that the company will rent the office block for years and will then purchase the property at the end of the rental period for a final payment of million. It is further agreed that rent will be paid quarterly in arrears and will be increased every years at the rate of per annum compound. The initial rent has been set at million per annum with the first rental payment due exactly three months after the date of occupation.

i The developer was able to finance this investment from a loan at a borrowing rate of per annum effective. Calculate the net present value of the profit from this investment at the rate of borrowing.