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You acquire a $100,000 warehouse property, subject to a 30 year NNN lease, with a Leverage Ratio of 4x. The cost of debt is 4.0%
You acquire a $100,000 warehouse property, subject to a 30 year NNN lease, with a Leverage Ratio of 4x. The cost of debt is 4.0% and the cost of equity is 18.0%. Your sole tenant recently issued 10-year bonds at 5.0% and the bonds are trading at 7.0%. You plan to build an addition to the building and rent the new space to a second tenant. What is your cost of capital to evaluate the potential new revenues?
A. 4.0%
B. .075
C. .098
D. .18
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