Howdy LLC is interested in purchasing and leasing $100$ offices. The Rent for each office is $$3,500$ per month. The vacancy factor is expected to be $15\%$ and estimated operating expenses of $29\%$ of the project gross annual income. The cap rate is $10\%$ and long$-$term debt service is $9\%.$

I. Calculate the estimated net income after debt service assuming debt financing to be $50\%.$

II$.$ Calculate the return on equity $($ROE$)$ assuming that the actual project cost turned out to be exactly the same as the total loan amount and the developer was able to use the available equity financing amount to pay off some loan amount upfront.

III. Calculate the return on equity $($ROE$)$ assuming that the actual project cost is the same as the capitalized value $($the economic value$)$ of the project.

IV$.$ Determine which option $(2$ or $3)$ provides you the best ROE. Justify your answer.

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