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The ABC Corporation is considering opening an office in a new market area that would allow it to increase its annual sales by $2.7 million. The cost of goods sold is estimated to be 40 percent of sales, and corporate overhead would increase by $309,500, not. including the cost of either acquiring or leasing office space. The corporation will have to invest $2.7 million in office furniture, office. equipment, and other up-front costs associated with opening the new office before considering the costs of owning or leasing the office space. A small office building could be purchased for sole use by the corporation at a total price of $6.4 million, of which $900.000 of the purchase price would represent tand value, and $5.5 million would represent building value. The cost of the building would be depreciated over 39 years. The corporation is in a 21 percent tax bracket. An investor is willing to purchase the same building and lease it to the corporation for $735,000 per year for a term of 15 years, with the corporation paying all real estate operating expenses (absolute net lease). Real estate operating expenses are estimated to be 50 percent of the lease payments. Estimates are that the property value will increase over the 15-year lease term for a sale price of $6.9milli at the end of the 15 years. If the property is purchased, it would be financed with an interest-only mortgage for $3.340.000 at an interest rate of 4.5 percent with a balloon payment due after 15 years. Required: a. What is the return from opening the office building under the assumption that it is leased? b. What is the return from opening the office bullding under the assumption that it is owned? c. What is the return on the incremental cash flow from owning versus leasing? Complete this question by entering your answers in the tabs below. What is the rett from opening the office building under the assumption that it is leased? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) You are an employee of University Consultants, Limited, and have been given the following assignment. You are to present an investment analysis of a small retail income-producing property for sale to a potential investor. The asking price for the property is $1,300,000; rents are estimated at $166,400 during the first year and are expected to grow at 2.5 percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A fully amortizing 70 percent loan can be obtained at 6 percent interest for 30 years (total annual payments will be monthly payments 12 ). The property is expected to appreciate in value at 3 percent per year and is expected to be owned for five years and then sold. Required: a. What is the first-year debt coverage ratio? b. What is the terminal capitalization rate? c. What is the investor's expected before-tax internal rate of return on equity invested (BTIRR)? d. What is the NPV using a 13 percent discount rate? e. What is the profitability index using a 13 percent discount rate? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. What is the profitablity index using a 13 percent discount rate? (Do not round intemediate calculations. Round your final answer to 2 decimal places.)