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Evaluate the proposal usaing the three basic method

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Reference no: EM131809834

Problem

A firm considering the purchase of forty year old building, the following pertinent data were provided:

Acquisition Cost 12,000,000
Economic life (remaining) 10 years
Salvage Value 200,000
Annual Rental Income 5,000,000
Annual Expense 3,000,000
Net Income before Tax and Depreciation 2,000,000
Depreciation (straight line method) 1,000,000
Income Tax (withheld by lessor) 50,000
Average Net Annual Earnings 950,000
Desire rate of Return 25%

Require:

Evaluate the proposal usaing the 3 Basic method

Reference no: EM131809834

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