Question 1 Consider a 200,000 SF office building complex, with NOI of $25/SF/year with rents and oper- ating expenses paid in arrears (at the end of the year) annually, and no capital expenditures. The rent will increase by 3% per year. The discount rate is 10%/year. a. What is the value of this office building, assuming that the building is sold at the end of year 10 and the cap rate at that time is expected to be 10%? What is the cap rate at time 0? b. What is the value of this office building, assuming that the building will be held and ented indefinitely (perpetually)? What is the implied cap rate at time 0? c. What is the value if the rents are paid in advance (at the beginning of the year) and the building is rented perpetually?

Bruno Corporation is involved in the business of injection molding of plastics. It is considering the purchase of a new computer-aided design and manufacturing machine for $439,500. The company believes that with this new machine it will improve productivity and increase quality, resulting in an increase in net annual cash flows of $103,887 for the next 6 years. Management requires a 10% rate of return on all new investments. Calculate the internal rate of return on this new machine. Should the investment be accepted?

Question: Your client is asking you to design a Flux Capacitor. The Flux Capacitor is expected to cost $5,200 to build. If operations and maintenance costs are anticipated to be 15% of the build costs the first year of operation and operation and maintenance costs will increase by 6% each year after, how much will your client have invested in the Flux Capacitor after 5 years?   Notes from instructor:  I have had a few questions about the Econ. Assignment. I want to clarify that the 6% interest rate does not accumulate over 4 years and it is not added to the 15%. If something increases by the interest it is (1+i) each year. I recommend finding the cost of each year and then summing them up. The equation is not direct from the FE manual so this is going to best your best course of action for now.

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