Find how much would be willing to pay for the warehouse now

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Reference no: EM132965067

You are considering buying an old warehouse and converting into an office building for rental. The following data is given:

Project length: 10 years
Remodeling cost at time 0: $500,000.
Annual rental income: $800,000.
Annual upkeep costs: $50,000.
Estimated property value after 10 years: $2,500,000.
Interest rate: 8%

Problem (a) Given the financial data, how much would you be willing to pay for the warehouse now? If you were to pay that amount, what would be the payback period and discounted payback period?

Problem (b) Suppose the property is for sale at $4,000,000. If you were to buy it at this price, what would be the simple payback period? What is the discounted payback period? What would be the project balance halfway into your investment? When would the project balance go from negative balance to positive balance?

Reference no: EM132965067

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