E9 1. Investment ProblemCost of bldg..=5MGross Revenue = 9.5 MOperating expense = 4MNominal interest rate = 12%Ongoing inflation rate = 8%a.) How much is the total profit?b.) Determine the expected rate of return (r)c.) Determine the real interest rated.) Determine the interest coste.) How much will be added to the firm's profit?

Answered: enue = 9.5 M expense = 4M terest rate=1

Business

Accounting

enue = 9.5 M expense = 4M terest rate=1

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 14MC: This calculation determines profitability or growth potential of an investment, expressed as a...

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Question

1. Investment Problem
Cost of bldg..=5M
Gross Revenue = 9.5 M
Operating expense = 4M
Nominal interest rate = 12%
Ongoing inflation rate = 8%
a.) How much is the total profit?
b.) Determine the expected rate of return (r)
c.) Determine the real interest rate
d.) Determine the interest cost
e.) How much will be added to the firm's profit?

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