e355t1q1

e355t1q1 - E355-Spring08-Test1-Sol 1.1a) Dr. Merino...

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E355-Spring08-Test1-Sol 1.1a) Draw the cash flow diagram. [2 point] Dr. Merino invested in new building in Hoboken 15 years ago. The building was purchased for $7M and in its first year of use, $500K was spent on maintenance, and this maintenance cost increased by $10K each year until today. Moreover, an important part of the purchased building had to be replaced 8 year after the purchase (year 8) and the value came out to be $350K. Dr. Merino has just sold the building for $ 2M as per high market rate. $ 7M A Maintenance = $500K G = $10K $ 2M $350K -15 -12 -10 -9 -7 -3 -2 -1 0 - 14 - 13 -11 -8 -6 -4 -5 E355-Spring08-Test1-Sol Page 1 of 5 3/3/2008
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e355t1q1 - E355-Spring08-Test1-Sol 1.1a) Dr. Merino...

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