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MUST SHOW EXCEL WORK: Patricia Van Auken is a prospective buyer of an apartment building on leased land.

MUST SHOW EXCEL WORK: Patricia Van Auken is a prospective buyer of an apartment building on leased land. At the end of 20 years, the land and the building revert to the lessor with no terminal value to the buyer. Annual rentals on the building are expected to be $126,000, while maintenance and other cash expenses are expected to average $60,000 per year.
a. If Van Auken’s opportunity cost of funds is 13 percent, what is the maximum price she should pay for the building?
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Dear Student, Please check the attached solutions of... View the full answer

CH050510_508312_FIN(2).xls

Cash flows per year for 20 years
Rentals
Expenses
Profit $126,000
$60,000
$66,000 Annual cash flow
Number of years
Cost of funds
Maximum price that should be paid $66,000
20
13%
$463,634

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