You have decided to invest in a small commercial office building that has one tenant for a price of $200,000. The tenant has a lease that calls for annual rent

payments of $15,000 per year for the next three years. Hint # 1 However, after that leases expires you expect to be able to increase the

rent by 4% per year for the next 7 years. Hint # 2 You plan to sell the building for $325, 000 ten years from now. Hint # 3

1. Complete table 1 showing the projected cash flows for this investment, assuming the next lease payment will be made at the end of year one

B. Assuming that you need to earn 11% on this investment, what is the maximum price you would be willing to pay for the building?

3. If the current price was $250,000 what rate of return would you earn.