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Q3A commercial building that costs x million $ has an annual gross renta income of y million $ in year 1. Operating expenses (maintenance, insurance
Q3A commercial building that costs x million $ has an annual gross renta income of y million $ in year 1. Operating expenses (maintenance, insurance premium, caretaker services and administration costs) make up 12% of the gross rent. The building is assumed to be sold after 3 years (1 January year 4) for x $ kroner. Assume further that the purchase and sale value as well as the rental income above are stated in fixed kroner at time and that the annual price increase is budgeted at 2%. The building is depreciated on a balance group of up to 2%. Tax rate is 22%. Each operating asset that belongs to the balance group must be entered in a separate account, while taxable gains and losses are entered in a joint profit and loss account where the rate for income or deduction is 20%. Which expression of the project's nominal internal rate before tax is correct
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