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Suppose that you are the manager of a small company that is contemplating construction of a suburban office block. The cost of buying the
Suppose that you are the manager of a small company that is contemplating construction of a suburban office block. The cost of buying the land and constructing the building is $760,000. Your company has cash in the bank to finance construction. You forecast a shortage of office space in the area and predict that you will be able to rent out the building for two years at $33,000 a year. You forecast that at the end of that time you will be able to sell the building for $864,000. Thus, there are now two future cash flows--a cash flow of C = $33,000 at the end of one year and a further cash flow of C = ($33,000 +$864,000) = $897,000 at the end of the second year. == a. Calculate the NPV of the office building venture at interest rates of 5, 10, and 15%. b. At what discount rate (approximately) would the project have zero NPV? Complete this question by entering your answers in the tabs below. Required A Required B Calculate the NPV of the office building venture at interest rates of 5, 10, and 15%. (Nega a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal p Net present value at 5% Net present value at 10% Net present value at 15% Required A Required B At what discount rate (approximately) would the project have zero NPV decimal places.) Approximate discount rate %
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