A shopping center costing $20,000,000 will have an estimated net annual income of $2,000,000. In...
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Accounting
A shopping center costing $20,000,000 will have an estimated net annual income of $2,000,000. In 10 years it is estimated the center can be sold for $15,000,000.
(a) What is the expected rate of return?
(b) Is it profitable to sell the shopping center in 10 years? Why?
Use the tables below.
n = 1,
P/F
P/A
A/F
A/P
F/P
F/A
i = 5 %
0.95238
0.9523
1.00000
1.05000
1.0500
1.0000
i = 7 %
0.93458
0.9345
1.00000
1.07000
1.0700
1.0000
i = 9 %
0.91743
0.9174
1.00000
1.09000
1.0900
1.0000
i = 11 %
0.90090
0.9009
1.00000
1.11000
1.1100
1.0000
n = 10,
P/F
P/A
A/F
A/P
F/P
F/A
i = 5 %
0.61391
7.7217
0.07950
0.12950
1.6288
12.577
i = 7 %
0.50835
7.0235
0.07238
0.14238
1.9671
13.816
i = 9 %
0.42241
6.4176
0.06582
0.15582
2.3673
15.192
i = 11 %
0.35218
5.8892
0.05980
0.16980
2.8394
16.722
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