The management company you retain to oversee and lease your 20-year old, 100,000 square foot warehouse has come to you with a proposal to upgrade the warehouse including new loading docks to accommodate "no lift" tractor trailers and energy efficient lighting. You are thinking about selling the warehouse next year. If the capital investment for these improvements equals $500,000 and an associated net rent increase of $1.00 per square foot can be achieved once improvements are completed. Cap rates for warehouses of your vintage are estimated to be 7%. Similar warehouses in your market have sold within 6 months on average. Would you make this investment? Why?

The management company you retain to oversee and lease your 20-year old, 100,000 square foot warehouse has come to you with a proposal to upgrade the warehouse including new loading docks to accommodate "no lift" tractor trailers and energy efficient lighting. You are thinking about selling the warehouse next year. If the capital investment for these improvements equals $500,000 and an associated net rent increase of $1.00 per square foot can be achieved once improvements are completed. Cap rates for warehouses of your vintage are estimated to be 7%. Similar warehouses in your market have sold within 6 months on average. Would you make this investment? Why?

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter26: Capital Budgeting (capbud)

Section: Chapter Questions

Problem 1R

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