Your aunt inherited an office complex a long time ago and is paying a pretty high management fee to keep it running. Since she is mostly concerned with cash flow and not property value appreciation, she has asked you to use below$-$line treatment of capital expenditures.

Here are some key metrics on the property: $3$ office units, contract rents per unit: $$2,500$ per month; vacancy and collection losses: $12\%$; operating expenses: $$35,000$; capital expenditures: $5\%.$