Exhibit 10-1

Exhibit 10-2

Raul Martinas, a professor of languages at Eastern University, owns a small office building adjacent to the university campus. He acquired the property 10 years ago at a total cost of $563,000that is, $53,000 for the land and $510,000 for the building. He has just received an offer from a realty company that wants to purchase the property; however, the property has been a good source of income over the years, and so Martinas is unsure whether he should keep it or sell it. His alternatives are as follows: a. Keep the property. Martinas's accountant has kept careful records of the income realized from the property over the past 10 years. These records indicate the following annual revenues and expenses: Martinas makes a $12,750 mortgage payment each year on the property. The mortgage will be paid off in eight more years. He has been depreciating the building by the straight-line method, assuming a salvage value of $76,500 for the building, which he still thinks is an appropriate figure. He feels sure that the building can be rented for another 15 years. He also feels sure that 15 years from now the land will be worth three times what he paid for it. $ 167,000 Rental receipts Less: Building expenses: Utilities Depreciation of building Property taxes and insurance Repairs and maintenance Custodial help and supplies Net operating income $ 27,150 17,340 20,250 17,800 50,000 132,540 $ 34,460 b. Sell the property. A realty company has offered to purchase the property by paying $234,000 immediately and $28,250 per year for the next 15 years. Control of the property would go to the realty company immediately. To sell the property, Martinas would need to pay the mortgage off, which could be done by making a lump-sum payment of $122,500. 0 Period 4% 5% 6% 8% 10% 14% 16% 20% 22% 24% 26% 28% 30% 40% 1 0.902 0.952 0.943 0.920 0.909 0.893 0.877 0.862 0.847 0.833 0.820 0.800 0.794 0.781 0.789 0.714 2 0.925 0.907 0.890 0.857 0.820 0.797 0.709 0.743 0.718 0.694 0.072 0.050 0.030 0.610 0.592 0.510 3 0.889 0.864 0.840 0.794 0.751 0.712 0.675 0.041 0.009 0.579 0.551 0.524 0.500 0.477 0.455 0.364 0.855 0.823 0.792 0.735 0.083 0.630 0.592 0.552 0.510 0.482 0.451 0.423 0.397 0.373 0.350 0.260 5 0.822 0.784 0.747 0.081 0.021 0.507 0.519 0.470 0.437 0.402 0.370 0.341 0.315 0.291 0.209 0.180 0.790 0.740 0.705 0.030 0.564 0.507 0.450 0.410 0.370 0.335 0.303 0.275 0.250 0.227 0.207 0.133 7 0.700 0.711 0.005 0.583 0.513 0.452 0.400 0.354 0.314 0.279 0.249 0.222 0.198 0.178 0.159 0.095 8 0.731 0.077 0.027 0.540 0.467 0.404 0.351 0.305 0.200 0.233 0.204 0.179 0.157 0.139 0.123 0.068 9 0.703 0.645 0.592 0.500 0.424 0.361 0.303 0.203 0.225 0.194 0.167 0.144 0.125 0.108 0.094 0.048 10 0.070 0.614 0.558 0.403 0.380 0.322 0.270 0.227 0.191 0.102 0.137 0.110 0.099 0.085 0.073 0.033 11 0.050 0.585 0.527 0.429 0.350 0.287 0.237 0.195 0.102 0.135 0.112 0.094 0.079 0.000 0.050 0.025 12 0.025 0.557 0.497 0.397 0.319 0.257 0.203 0.108 0.137 0.112 0.092 0.070 0.002 0.052 0.043 0.018 13 0.001 0.530 0.409 0.308 0.290 0.229 0.182 0.145 0.110 0.093 0.075 0.001 0.050 0.040 0.033 0.013 14 0.577 0.505 0.442 0.340 0.203 0.205 0.100 0.125 0.099 0.078 0.002 0.049 0.039 0.032 0.025 0.009 15 0.555 0.481 0.417 0.315 0.239 0.183 0.140 0.108 0.084 0.005 0.051 0.040 0.031 0.025 0.020 0.000 10 0.534 0.458 0.394 0.292 0.218 0.103 0.123 0.093 0.071 0.054 0.042 0.032 0.025 0.019 0.015 0.005 17 0.513 0.371 0.270 0.198 0.146 0.108 0.080 0.000 0.034 0.020 0.020 0.015 0.012 0.003 18 0.494 0.410 0.350 0.250 0.180 0.130 0.095 0.009 0.051 0.038 0.028 0.021 0.010 0.012 0.009 0.002 19 0.475 0.390 0.331 0.232 0.104 0.110 0.083 0.000 0.043 0.031 0.023 0.017 0.012 0.009 0.007 0.002 20 0.450 0.377 0.312 0.215 0.149 0.104 0.073 0.051 0.037 0.020 0.019 0.014 0.010 0.007 0.003 0.001 21 0.439 0.359 0.294 0.199 0.135 0.093 0.004 0.031 0.022 0.015 0.011 0.008 0.000 0.004 0.001 22 0.422 0.342 0.278 0.134 0.123 0.083 0.050 0.038 0.020 0.018 0.013 0.009 0.000 0.004 0.003 0.001 23 0.400 0.320 0.202 0.170 0.112 0.074 0.049 0.033 0.022 0.015 0.010 0.007 0.005 0.003 0.002 24 0.390 0.310 0.247 0.158 0.102 0.006 0.043 0.028 0.019 0.013 0.008 0.000 0.004 0.003 0.002 0.375 0.295 0.233 0.140 0.092 0.059 0.033 0.024 0.010 0.010 0.007 0.005 0.003 0.002 0.001 26 0.361 0.281 0.220 0.135 0.084 0.053 0.033 0.021 0.014 0.009 0.000 0.004 0.002 0.002 0.001 27 0.347 0.208 0.207 0.125 0.070 0.047 0.029 0.018 0.011 0.007 0.005 0.003 0.002 0.001 0.001 28 0.333 0.255 0.190 0.110 0.009 0.042 0.020 0.010 0.010 0.000 0.004 0.002 0.002 0.001 0.001 29 0.321 0.243 0.185 0.107 0.003 0.037 0.022 0.014 0.008 0.005 0.003 0.002 0.001 0.001 30 0.308 0.231 0.174 0.099 0.057 0.033 0.020 0.012 0.007 0.004 0.003 0.002 0.001 0.001 40 0.208 0.142 0.097 0.040 0.022 0.011 0.005 0.003 0.001 0.001 Period 9 1 : 0.43 1. 0.90g 393 0.87 862 0.8%) 333 2.820 0.806 1794 31 55 14 2 1. 1. 1. 1. 1.36 1.690 1.=? 1.05 1.566 1.528 192 157 1-24 1392 1.38] 1.224 3 2.373 2.72 2. ! 2. 2.87.02 2.322 2.26 2.174 2.106 2.02 1.98] 1923 1. 3. 3.4 3. 3. 3.170 3.037 1914 2.79% 2.80 2589 2. 94 2. D4 2.20 2.26] 2.1 .212 3.3 3.79] 3.80% +33 3274 3127 2.99] 2.864 2.7% 2.83% 2532 2 35 2.03% 5. 4.355 4.11] 3.889 2.685 3698 326 3.137 3.020 2.885 3759 2.5=2.168 . 2. 5.222 3.2 4.868 4.564 4.288 4.039 3812 3.605 3618 3.2% 3.08 2937 2.802 2263 8 5.43 5.210 5.: 4.968 4.35 4.364 4.078 3.837 3.1 3.2%) 3.07 1923 2.33] 9 7.435 5. 247 2.59 1325 4.94% 4.80 4303 4.03] 3.783 33B 3.184 3019 2379 1 . 14 2.650 2.216 4.83 4.494 4.192 2.923 3.662 2.465 3.255 2.092 2.5 14 11 8. B. 3 7. 9% 2.935 453 2.029 4.85 4.327 4.03% 3.76 3.54 33% 3.13438 12 9.323 8.a 8.334 814 199 80 2.19747934 35 4.127 3.85] 3.806 33873190 13 93 8.33 1.3.74 7.103 24 2.82 362 4.910 4.532 4.205 3.912 3.656 2627 22:26BE 14 99 9.23 3.24 7.367.628 ..002 2.8 3.00 4.51] 4.265 3962 3.695 355 3.25 27 ] 11.1] 0.3 8.5 7.606 .311 .. 1 2 3.575 2.092 4.5 4.215 4.001 3726 33 3.258 284 11.6 , 10 3.31 7.224 974 255 2.665 2.162 4.7 30 4.357 4.033 3.75] 3.50 2.282 2.489 17 12.1 ce 1.27 2.022 7.120 .372 2745 2222 4.775 4.39] 4.059 3.77] 2.5 18 3.29% 2.492 13 11 .822 9. 2.20] 7.250 57 2.818 2.275 4.812 4.5 15 4.080 3.786 2.525 3.204 2.494 13 13.1 111 3. 4 7.36G 550 3.337 3.316 4.84 4.: 4.097 3799 3539 3311 2.696 13 11 9.19 3.5 14 7 BS .B23 929 35:4.80 460 4.110 3.80s 3.5% 3316 2697 12.82 11 10.017 2.569 7.562 .587 2975384 4.89] 4.75 4.12] 2.816 3.55] 320 2.698 22 12.1 2.242 C. D 3.772 7.5 :01] 10 4.90 4.48 4.130 3.322 39 :32:298 .. 3. 2. 303 10.37] 1.718 792 .04 32 4.923 4. 99 4.137 2.827 332 24 3.7% 12.52 2.985 7.784 2.835 07:25] 4.937 4.50] 4.13 3.83] 352 3327 2.99 2 13. 1,054 2.72 2.077 7.362 .333..097 57 4.98 4.514 4.167 3834 3564 3.325 2.99 .. 3.003 3] 191 1.89 906 118 80 4.95 4.520 4.15] 3.837 3.5 3.330 2. Do 27 2 4 13.2] c.92 5.237 7.96..935..136 392 4.94 4.32 4.134 3.39 567 3.33] 2.5DD .. 3. 11.05 5.307 7.984 951 .152 2.502 4.970 4.528 4.157 3.840 2.568 3.33] 5 .. 1924 1.14 12.99 11.122 2.370 3.022 982.166 2510 4.95 4.53] 4.155 3.86] 3.565 3.332 3.500 13.373 3. 11 27 2.055 7.003.177 2.517 4. 4.534 4.160 3.82 3.565 3.332 2.500 1. 12= 13.0 11.92 5.79 2.24 7.105.234 2.548 4.997 4.244 4.166 2.34 2.97] 33 3.00 Click here to view Exhibit 10-1 and Exhibit 10-2, to determine the appropriate discount factor(s) using tables. Required: Assume that Martinas requires a 12% rate of return. Compute net present value in favor of (or against) keeping the property using the total-cost approach. (Round discount factor(s) to 3 decimal places and other intermediate calculations to the nearest dollar amount.) Net present value