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One of your clients is currently considering an investment in a business property and you are expected to use the prospective rate of return of
One of your clients is currently considering an investment in a business property and you are expected
to use the prospective rate of return of the investment to determine whether it is worth while investing
in the property. If it is worth while to invest in the property you should determine which of three
alternative buildings would yield the best return IRR Your client can purchase the property for R
and then he can build one of the following buildings on it:
Building A: R
Building B: R
Building C: R
It can be assumed that the purchasing and construction will take place at the beginning of the first
year. The expected annual income from this project will be:
Building A: R
Building B: R
Building C: R
The total annual expenditure for each of the buildings will be:
Building A: R
Building B: R
Building C: R
It can be assumed that the building will be used for years where after the building will be worth
nothing and the land will be sold for the initial purchasing price. Use a minimum attractive rate of
return of
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