Business Assumptions: Assume that Drechtal receives approval of their first oncology drug, Trianoline. Equity is limited. Whatever equity Drechtal will need to purchase its headquarters could alternatively be invested in its core business, should it not purchase its headquarters. Every dollar Drechtal invests in its core business generates cash flow equal to 9.132% of the investment. At the same time, the investments value grows by 2% annually. (This means that the cash flow generated by new investment is also growing at 2%.) The depreciable life of all new pharmaceutical investments is 10 years. In Switzerland, both the corporate tax rate and the capital gains tax rate are 18% (both price appreciation and depreciation recapture). Drechtals CFO is confident that given its current capital structure (approximately 57% debt), its required return on equity (for its core business) is 22%. Drechtal can borrow in the Swiss bond market at 2% up to a 10-year maturity, with annual coupons on the bonds and no amortization. Should Drechtal invest in its core business, it will initially borrow at time 0 in the Swiss bond market so that its initial capital structure is unchanged. Drechtal will not adjust its debt holdings going forward. Lease-Buy Assumptions: Office tenants in Basel sign 10-year NNN leases, with a 5% step-up in rent in Year 5. A single-tenant A-quality office building with a long lease typically incurs capital expenditures equal to roughly 16% of NOI. The new building under construction will be of much greater quality than neighboring buildings, and will therefore likely attract tenants with rents roughly 20% above the current "prime'' level for the neighborhood. Total expenses (operating + vacancy/credit) of a new Swiss office building are 34% of gross rent if the building is professionally managed. Expenses incurred by corporate owners are typically 10% higher. This can be calculated not as 44% of the rent, but rather (1 + 10%)*(34%*gross rent). Property sales brokers charge a 3% commission upon sale. Swiss commercial property valuation in Basel is approximately 80% structure and 20% land. The depreciable life of Swiss property is 20 years. You may not depreciate land in Switzerland.