Table 1: Costs of Buying Office Space Year Down Payment Opportunity Cost Annual Payment Future/Present Value (-10%) 0 Nct Present Value of Costs (Discounting for Time): Table 2. Benefits of Reselling Office Space Year Appreciation Scenario (75) Resale Value Depreciation Scenario 1.25) 0 ! 2 3 EMV (Discounting for Risk: PV of Benefits (Discounting for Time. -10%); Table 3: Costs of Leasing Office Space Down Payment Opportunity Cost Future/resent Value (d=10%) Year Annual Payment 0 Net Present Value of Costs (Discounting for Timela CBA Devi Cost of Buying 50.00 Cost of leasing S000 Assignment: There are three tables in the Excel file called Lab4- tables.xlsx. You should use Table 1 to calculate the Net Present Value of costs associated with the "buy" option. Use Table 2 to calculate the Present Value of benefits (returns) from reselling the office space after the election, associated with the "buy" option. Use Table 3 to calculate the Net Present Value of Costs associated with the "lease" option. Background: You are hired as a technical consultant for a mainstream political party to provide technical policy advice on an important long-term policy decision. In the meantime, it is summer of 2021, and the party is planning on running a strong Senate election campaign in 2022, and your policy advice could play a crucial role in the strategic budget position of the campaign. The party decided to locate its campaign headquarters in a major metropolitan area with high-priced real estate, but with easy access to donors and large contributors. Party leaders know you have experience conducting cost-benefit analysis from your time at the John Glenn College. The party wants you to help determine if they should buy the campaign office space and resell it in 2023. or lease the office space for the same period of time. Purchase Decision The office space has a current sale price of $5,000,000. If the party purchases the office space, it will be required to put a 10% down payment now (2021). Because it will only need the office space for three years (2021- 2023), the party will have a 3-year structured mortgage of 3 annual payments at an annual interest rate of 4% By 2023, the party will own the office space outright, and can resell the property at whatever the market value in 2023 will be (i..., discounting for depreciation risk). . For the past ten years, commercial real estate in in the city has gained value at the rate of 2% annually. However, some experts believe that there is also a chance that the office space could lose market value at 2% annually. (Therefore, there is a 75% chance that the property will gain 2% value annually for the next three years, and there is a 25% chance that the property will lose 2% value annually for the next three years.) The party asks you to factor in the opportunity cost of the 10% down payment. That is, party leaders realize that it could take the money from the down payment and put it in a high yield money market account and cam an annual interest rate of 10%. The party also asks you to use this rate of 10% as the discount rate for the CBA Lease Decision: If the party decides to lease the office space, it will have to put a 5% down payment now (2021). The party has also asked you to factor in the opportunity cost of the down payment from the leasing option, under the same 10% money market account alternative. The party will have to pay three annual lease payments of $250,000 The party will not face any depreciation risk in the Lease option, Dashboard Calendar To Do Notifications Inbox Part 4: Based upon the cost-benefit analysis you conducted, what will your recommendation be for the party? In a paragraph, fully explain your recommendation given your cost-benefit analysis. Your write up should include the total costs and benefits (dollar figures) of both the lease and buy options as well as an explanation of how you arrived at those figures after discounting for risk and time. Table 1: Costs of Buying Office Space Year Down Payment Opportunity Cost Annual Payment Future/Present Value (-10%) 0 Nct Present Value of Costs (Discounting for Time): Table 2. Benefits of Reselling Office Space Year Appreciation Scenario (75) Resale Value Depreciation Scenario 1.25) 0 ! 2 3 EMV (Discounting for Risk: PV of Benefits (Discounting for Time. -10%); Table 3: Costs of Leasing Office Space Down Payment Opportunity Cost Future/resent Value (d=10%) Year Annual Payment 0 Net Present Value of Costs (Discounting for Timela CBA Devi Cost of Buying 50.00 Cost of leasing S000 Assignment: There are three tables in the Excel file called Lab4- tables.xlsx. You should use Table 1 to calculate the Net Present Value of costs associated with the "buy" option. Use Table 2 to calculate the Present Value of benefits (returns) from reselling the office space after the election, associated with the "buy" option. Use Table 3 to calculate the Net Present Value of Costs associated with the "lease" option. Background: You are hired as a technical consultant for a mainstream political party to provide technical policy advice on an important long-term policy decision. In the meantime, it is summer of 2021, and the party is planning on running a strong Senate election campaign in 2022, and your policy advice could play a crucial role in the strategic budget position of the campaign. The party decided to locate its campaign headquarters in a major metropolitan area with high-priced real estate, but with easy access to donors and large contributors. Party leaders know you have experience conducting cost-benefit analysis from your time at the John Glenn College. The party wants you to help determine if they should buy the campaign office space and resell it in 2023. or lease the office space for the same period of time. Purchase Decision The office space has a current sale price of $5,000,000. If the party purchases the office space, it will be required to put a 10% down payment now (2021). Because it will only need the office space for three years (2021- 2023), the party will have a 3-year structured mortgage of 3 annual payments at an annual interest rate of 4% By 2023, the party will own the office space outright, and can resell the property at whatever the market value in 2023 will be (i..., discounting for depreciation risk). . For the past ten years, commercial real estate in in the city has gained value at the rate of 2% annually. However, some experts believe that there is also a chance that the office space could lose market value at 2% annually. (Therefore, there is a 75% chance that the property will gain 2% value annually for the next three years, and there is a 25% chance that the property will lose 2% value annually for the next three years.) The party asks you to factor in the opportunity cost of the 10% down payment. That is, party leaders realize that it could take the money from the down payment and put it in a high yield money market account and cam an annual interest rate of 10%. The party also asks you to use this rate of 10% as the discount rate for the CBA Lease Decision: If the party decides to lease the office space, it will have to put a 5% down payment now (2021). The party has also asked you to factor in the opportunity cost of the down payment from the leasing option, under the same 10% money market account alternative. The party will have to pay three annual lease payments of $250,000 The party will not face any depreciation risk in the Lease option, Dashboard Calendar To Do Notifications Inbox Part 4: Based upon the cost-benefit analysis you conducted, what will your recommendation be for the party? In a paragraph, fully explain your recommendation given your cost-benefit analysis. Your write up should include the total costs and benefits (dollar figures) of both the lease and buy options as well as an explanation of how you arrived at those figures after discounting for risk and time