You are considering purchasing an office building that costs $1,000,000. After operating expenses you estimate that the building will generate $44,500 rent income. You plan to keep the building for 10 years, at the end of which you will sell it at an estimated price of $1,200,000.

a) Assuming that you want a minimum return of 6% per year, calculate the net present value of this investment. Should you invest?

You have talked to a banker who is willing to give you a loan of $500,000 which you will pay back over 10 years at an annual interest rate of 4%. Assume you will pay back your loan with annual payments at the end of each year.

b) Calculate the annual loan payments to the bank.

c) Assuming you take the loan, calculate the net present value of the investment. Enter formulas ONLY to CELLS B17 and B18 for calculation. Do not use any cells other than already provided in the worksheet

$1.000.000 $44.500 10 Purchase price of the building Annual net rent income Number of year until sold Estimated selling price Required annual return Net present value Invest? (yeso) $1.200.000 6% $500.000 4% Bank loan Annual interest Number of annual payment Annual payments 10 Using the loan Annual net income after loan payments Net present value