Raul Martinas, a professor of languages at Eastern University, owns a small office building adjacent to the university campus. He acquired the property 10 years ago at a total cost of $669,500-that is, $90,500 for the land and $579,000 for the building. He has just received an offer from a realty company that wants to purchase the property, however, the property has been a good source of income over the years, and so Martinas is unsure whether he should keep it or sell it. His alternatives are as follows: a. Keep the property. Martinas's accountant has kept careful records of the income realized from the property over the past 10 years. These records indicate the following annual revenues and expenses: Martinas makes a $14,475 mortgage payment each year on the property. The mortgage will be paid off in eight more years. He has been depreciating the building by the straight-line method, assuming a salvage value of $86,850 for the building, which he still thinks is an appropriate figure. He feels sure that the building can be rented for another 15 years. He also feels sure that 15 years from now the land will be worth three times what he paid for it. Rental receipts Less: Building expenses: $171,000 Utilities $24,000 Depreciation of building 19,686 Property taxes and insurance 22,000 Repairs and maintenance 15,900 Custodial help and supplies 52,750 134,336 Net operating income $ 36,664 b. Sell the property. A realty company has offered to purchase the property by paying $222,000 immediately and $28,750 per year for the next 15 years. Control of the property would go to the realty company immediately. To sell the property, Martinas would need to pay the mortgage off, which could be done by making a lump-sum payment of $117,500. Click here to view Exhibit 10-1 and Exhibit 10-2, to determine the appropriate discount factor(s) using tables. F P= (1+r)" Period 4% 5% 6% 8% 1 0962 0952 0.943 2 0.925 0907 0.890 0357 0326 3 0 839 0.564 0.540 0.794 0.751 4 10% 12% 14% 16% 18% 20% 22% 24% 0.926 0.909 26% 28% 0 $93 0.877 0562 0547 0533 0520 0506 0.794 0.751 0769 0.714 0797 0,769 0.743 0715 0694 0.672 0.650 0.630 0.610 0.592 0510 0.712 0675 0641 0609 0.579 0.551 0.524 0.500 0477 0.455 0.364 0.855 0.823 0792 0.735 0683 30% 40% 5 6 0.636 0.592 0.552 0516 0.482 0451 0423 0.397 0.373 0.350 0.260 0822 0.784 0.747 0.651 0.621 0.567 0.519 0.476 0.437 0.402 0.370 0.341 0315 0.291 0.269 0.186 0.790 0.746 0.705 0.630 0.564 0.507 0.456 0.410 0.370 0.335 0.303 0.275 0.250 0.227 0207 0133 7 0.760 0.711 0665 0583 0.513 0452 0400 0.354 0.314 0.279 0.249 0222 0195 0.178 0159 0.095 S 9 0.731 0.677 0.627 0.540 0467 0404 0.351 0305 0266 0233 0204 0.703 0.645 0.592 0.500 0.424 0361 0308 0263 0225 0.194 0167 0179 0.157 0.139 0123 0.065 10 11 12 13 14 15 16 17 18 19 19 0144 0125 0.105 0.094 0.045 0.676 0.614 0.558 0463 0.386 0.322 0.270 0.227 0.191 0.162 0.137 0116 0.099 0.055 0.073 0.035 0.650 0.585 0.527 0429 0.350 0287 0237 0.195 0.162 0135 0112 0094 0.079 0.066 0056 0.025 0625 0.557 0.497 0.397 0.319 0.257 0205 0.165 0.137 0112 0.092 0.076 0062 0.052 0.043 0013 0.601 0.530 0.469 0.368 0290 0.229 0.182 0.145 0.116 0.093 0.075 0.061 0050 0.040 0033 0.013 0.577 0.505 0.442 0.340 0.263 0.205 0.160 0.125 0.099 0.078 0.062 0.049 0.039 0.032 0.025 0.009 0.555 0.451 0.417 0315 0.239 0.183 0.140 0.105 0.054 0.065 0.051 0.040 0031 0.025 0.020 0.006 0.534 0.458 0.394 0.292 0.215 0.163 0.123 0.093 0.071 0.054 0.042 0.032 0.025 0.019 0.015 0.005 0.513 0436 0.371 0.270 0.195 0.146 0.108 0.030 0.060 0.045 0.034 0.026 0020 0015 0012 0.003 0.494 0416 0.350 0.250 0.150 0130 0.095 0.069 0.051 0.033 0.028 0.021 0.016 0.012 0.009 0.002 0.475 0.396 0.331 0.232 0.164 0.116 0.053 0.060 0.043 0.031 0.023 0.017 0.012 0.009 0.007 0.002 20 0.456 0.377 0312 0.215 0.149 0.104 0073 0.051 0.037 0.026 0019 0.014 0.010 0.007 0.005 0.001 0439 21 0.359 0.294 0.199 0.135 0.093 0064 0.044 0.031 0.022 0.015 0.011 0.008 0.006 0.004 0.001 0422 0.342 0.278 0.154 0123 0.083 0.056 0035 0.026 0.013 0.013 0.009 0.006 0.004 0.003 0.001 23 0:406 0.326 0.262 0.170 0112 0.074 0.049 0.033 0.022 0.015 0.010 0.007 0.005 0.003 0.002 22 24 25 26 27 0.390 0.310 0247 0.155 0.102 0.066 0043 0028 0.019 0013 0.008 0.006 0.004 0.003 0.002 0.375 0.295 0.233 0.146 0.092 0.059 0.035 0.024 0.016 0.010 0.007 0.005 0.003 0.002 0.001 0361 0.281 0.220 0.135 0.054 0.053 0.033 0.021 0014 0.009 0.006 0.004 0.002 0.002 0.001 0.347 0.265 0.207 0.125 0.076 0.047 0.029 0.015 0.011 0.007 0.005 0.003 0.002 0.001 0.001 28 0.333 0.255 0.196 0.116 0.069 0.042 0.026 0.016 0.010 0.006 0.004 0.002 0.002 0.001 0.001 0321 0.243 0.185 0.107 0.063 0.037 0.022 0.014 0.008 0.005 0.003 0.002 0.001 0.001 0.308 0.231 0.174 0.099 0.057 0.033 0020 0012 0.007 0.004 0.003 0.002 0.001 0.001 0.005 0.003 0.001 0.001 29 30 40 0.205 0.142 0.097 0.046 0.022 0.011 00 -- 20% 22% 28% 10% 12% 14% 16% 18% 24% 26% 0909 0.393 0377 0362 0347 0333 0820 0306 0794 0781 0769 0.714 30% 405 1736 1690 1.647 1605 1566 1528 1.492 1457 1424 1392 1361 1224 2.322 2246 2174 2.106 2042 1961 1923 1565 1316 1.509 2457 2.402 3.170 3037 3.791 3605 Period 4% 5% 6% 8% 1 0.962 0.952 0943 0926 2 1536 1859 1833 1.783 3 2.775 2.723 2.673 2.577 4 3630 3.346 3.465 3.312 5 4.452 4330 4212 3993 6 5.242 5076 4917 4.623 4.355 4111 7 6.002 5.786 5.582 S 6.733 6463 6.210 5.747 5.206 4.868 4.564 5.335 4968 7.435 7.108 6.302 6247 10 8.111 7.722 7360 6710 11 $760 8.306 7.387 7.139 5.759 5.328 6.145 5.650 6.495 5.938 12 9.385 8863 8.384 7.536 6.314 6.194 13 9.986 9394 8853 14 10.563 9.899 9.295 15 11.115 10.350 9.712 16 11.652 10.838 10.106 8.559 8.851 7.904 7.103 6424 5.244 7.367 6628 7,606 6.811 7.824 6.974 17 12.166 11.274 10.477 9.122 18 12.659 11.690 10828 9372 5.022 7.120 8.201 7.250 19 13.134 12.085 11.158 20 21 22 23 12.550 24 26 22 25 15.622 14.094 12.783 15.983 14.375 10 675 13.003 10 310 10.935 27 2914 2798 2.690 2509 2494 2.404 2320 2.241 2.166 1.379 3433 3.274 3.127 2.991 2.564 2745 2635 2532 2.436 2035 3589 3.685 3.495 3326 3167 3020 2885 2.759 2643 2.165 4.288 4.039 3512 3.605 3416 3.242 3083 2937 2002 2.263 4.639 5.453 5.029 4656 4327 4.035 3.776 4344 4078 3.337 3619 3421 3241 3076 2925 2331 4.946 4607 4303 4031 3.756 3566 3.366 3.154 3019 2379 5.216 4533 4.494 4.192 3.923 3662 3.465 3.269 3.092 2414 3.544 3.335 3.147 2435 5.660 5.197 4.793 4439 4.127 3.851 3.606 3.387 3.190 2456 5842 5.342 4.910 4.533 4203 3.912 3.656 3427 3223 2.468 6.002 5468 5.000 4611 4.265 3.962 3.695 3459 3.249 2477 6.142 5.575 5092 4675 4.315 4001 3726 3483 3268 2454 6265 5669 5.162 4.730 4.357 4033 3.751 3.503 3.233 2489 6.373 5.749 5.222 4.775 4.391 4059 3.771 3515 3.295 2:492 6467 5818 5.273 4.312 4419 4080 3.786 3.529 3.304 2.494 9604 5.365 7.366 6.550 5.877 5316 4844 4442 4097 3.799 3539 3311 2.496 13.590 12.462 11.470 9.818 8.514 7.469 6.623 5929 5353 4870 4460 4110 3.500 3546 3316 2.497 14.029 12.821 11.764 10017 $649 7.562 6687 5.973 5.384 4.591 4476 4.121 3516 3.551 3320 2.495 14.451 13.163 12.042 10.201 8.772 7.645 6.743 6.011 5.410 4.909 4.488 4.130 3.822 3.556 3.323 2498 14 857 13.489 12.303 10.371 8.883 7.718 6.7921 6.792 6044 5:432 4.925 4.499 4.137 3.827 3.325 2.499 15.247 13.799 10529 8.985 7.784 6.535 6835 6073 5.451 4937 4507 4143 3.831 3327 2.499 9077 7.543 6.873 6.873 6097 5.467 4.945 4514 4.147 3.834 3.329 2499 9.161 7.896 6906 6.906 6118 5 430 4956 4520 4151 3837 3330 2.500 13.211 16.330 14.643 6.935 6136 5:492 4964 4.525 4.154 3.839 3331 2.500 9.237 7.943 6.935 25 16.663 6.961 6.152 5.502 4.970 4.528 4.157 3540 3.331 2.500 14.898 13.406 11.051 9.307 7.984 6.961 13.591 11.158 9370 8.022 6983 6983 16.954 15.141 6166 5.510 4.975 4.531 4159 3841 3.332 2.500 17.292 15.373 13.765 11.258 9427 8.055 7.003 7.003 6.177 5517 4.979 4.534 4.160 3542 3332 2500 11.925 7.105 6.234 5548 4997 4544 4.166 3.846 3.333 2.500 9.779 8244 7.105 29 30 40 19.793 17.159 15.046 Required: Assume that Martinas requires a 12% rate of return. Compute net present value in favor of (or against) keeping the property using the total-cost approach. (Round discount factor(s) to 3 decimal places and other intermediate calculations to the nearest dollar amount.) Net present value