Question
Please solve by explaining the button inputs on BA II Plus financial calculator. You can invest in one of two investments listed below. You cannot
Please solve by explaining the button inputs on BA II Plus financial calculator.
You can invest in one of two investments listed below. You cannot invest in both. If your cost of capital is 6%, which one should you invest in, and why?
Investment A A small apartment complex. This complex has 50 units and has an asking price of $5,000,000. You expect net income of $25,000 per month for 12 months. In months 13, 14, and 15 you plan to make capital improvements that will result in net income of -$10,000 in each month. After that, you expect to earn $40,000 until the end of year 10, when you expect to sell the property for $4,000,000.
Investment B A small office building. This building has an asking price of $6,750,000. If you purchase it you will have to make repairs and upgrades for the first two months, which will result in net cash flows of -$150,000 and -$100,000 respectively. In month 3 you will have net revenue of $25,0000, $50,000 in month 4, and then in 60,000 each month until you expect to sell the building for $4,500,000 at the end of year 8 (month 96.)
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