You are the financial manager for a healthcare organization that is considering the purchase of a building costing $3,000,000. The resale value would be $4,000,000 in 5 years when the organization expects to move into a wing of a new hospital that is being built. You will consider the financial impact of several scenarios.

The owners of the organization are concerned about the following:
The business needs to decide whether the future value of the projected purchase outweighs the interest they could earn on a CD that matures in 5 years.What happens if they earn some rent on part of the building?
You will make a recommendation to the company as to whether they should purchase the building now and whether they should seek a tenant for some of the offices.
If the interest rate is 8%, what is the present value of the sales price?Is the property investment attractive to you?(1) What is the present value of the future cash flows, if you also could earn $300,000 per year rent on the property? The rent is paid at the end of each year.