*Part 2*

You bought a piece of land at $1,000,000. You plan to build a 50,000 square foot building at cost of S100 per square foot, all inclusive, in addition to land cost. The completed building is expected to generate a monthly rent of S1.10 per square foot per month for year 1 and the rent will increase at 5% per year. The operating expenses will be 0.35 per square foot per month for year 1 and increase at 3% per year. At end of year 10, you plan to sell the property for $7,500,000. Assuming you will have an income depreciation charge every year based on the IRS allowed tax rate of 30% every year and you will take Part 2 schedule of 1/39h of the building cost only per year. Your capital gain tax rate is 20%. Part 1 Assuming you will obtain a bank loan of 75% of the initial cost at an interest rate of 5.50% per year. The loan requires interest payment only at end of each year and the loan principle is due at end of the 10th year (like a bond arrangement). Everything else stays the same as Part 1 except interest expenses are tax deductible. Re-calculate everything as you did in Part 1 Based on the result of Part 2 and an Incremental IRR analysis make your recommendation as which way to go, Part or Part 2, and explain how does financial leverage affect your decision in relation to the selection of this project? Assuming all cash investment and using a MARR of 12%, what is the Net Present Value of this 10-year investment and what is the IRR? Show the results as formatted below: 2-9 10 Operaing Expense Taable income Tax @30% ta rate Net income CFAT Also clearly show the calculations of each year's Depreciation Charges, Cash Flow After Tax at Year 10 for selling of the property and calculations of the present value and IRR, separately