Question
You are a commercial real.estte broker, eager to sell an office building. An investor is interested but demand 20% return of her equitt investment. The
You are a commercial real.estte broker, eager to sell an office building. An investor is interested but demand 20% return of her equitt investment. The building's selling price is 25 Million Pesos, and it promises free cash flows of 3 Million pesos annually in perpetuity. Interest only financing is available at 8 percent interest; that is; the debt is ourstanding forever amd requires no principal payments. The tax rate is 50 percent. a. Propose an investment finnacing package that meets the investors return target. b. Propose an investment financing package that meets the investors target when.she demands a 90 percent returns on equity. c. Why would an investor settle for 20 percent rwturn on this investment when she can get as high as 90 percent.
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