In the year 2019, Wells Fargo Securities analysts evaluate Liberty Property Trusts proposal for acquisition of a $10 million rental apartment building as indicated in its 8-K filing (i.e. bolt-on acquisition). Wells Fargo forecasts that the building will generate $6 million each year in rent over the following six years (2020-2025). Total operating expenses on lease and maintenance are expected to be $4.5 million a year. At the end of six years, the rental building is expected to be sold for $15 million as indicated in LRYs 8-K filing. The market value of total equity is $200 million and the market value of total assets is $500 million for LRY. Furthermore, analysts estimate an equity beta of 1.10 and a default risk premium of 2% (i.e. premium over 10-year Treasuries). Conditional on a risk-free rate of 1.9% (10-year Treasury yield), market risk premium (a.k.a. equity premium) of 5%, corporate tax rate of 21% and no preferred shares outstanding:

a. Please compute the dollar value-added of this bolt-on acquisition for LRY investors according to Wells Fargo Securities analysts forecasts. Conditional on LRYs total assets being fairly priced and no change in debt, what is the expected % stock price reaction to the approval of this asset purchase.

b. Please compute the dollar value-added of this bolt-on acquisition if the yield on 10-year Treasuries increases by 40 basis points and LRY changes its capital structure to $250 million in total equity and $250 million in total debt. No change in CF forecasts are expected.