QUESTION FOUR [25 MARKS] A Company is considering the purchase of land that could be developed into a class A office project. At the present time, the company believes that the site could support a 300,000 rentable square foot project with average rents of Sh. 20 per square foot and operating expenses equal to 40 percent of that amount. It also expects rents to grow at 3 percent indefinitely and believes that the Company should earn a 12 percent return (r) on investment. The building would cost Sh. 100 per square foot to build: Required (a) What would the estimated property value and land value be under the above assumptions? (8 marks) (b) Suppose the landowner is asking Sh. 12,000,000 for the land. Under assumptions in part (a) would this project be feasible? (4 marks) (c) If the land must be acquired for Sh. 12,000,000, returning to the assumptions in (a), how much of a change in the following would have to occur to make the project feasible? (Consider each item one at a time and hold all other variables constant.) (i) Expected return on investment (r). (4 marks) (ii) Expected growth in cash flows. (3 marks) (iii) Building cost. (3 marks) (iv) Rents. (3 marks)