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Armor Investment Company is considering the acquisition of a heavily depreciated building on 1 0 acres of land. It expects to rent the building as
Armor Investment Company is considering the acquisition of a heavily depreciated building on acres of land. It expects to rent the building as a storage facility and expects to collect cash flows equal to $ next year. However, because depreciation is expected to increase, Armor expects cash flows to decline at a rate of percent per year indefinitely. Armor expects to earn an investment return r at percent. a What is the value of this property Hint: g can be negative b Assume at year the building could be demolished and the land could be redeveloped with a strip retail improvement. It cost $ million to build and no NOI at year From year it would produce NOI of $ per year, grow at percent per year. Investors currently earn a percent return on such investments. What is the value of this property. List all cash flows from Year to Year
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