Garcia Developers Will Erect a Small Office Building at a Cost

question 25

Multiple Choice

Garcia Developers will erect a small office building at a cost of $4,500,000. They have a client who will lease the space for 5 years at a price that will produce free cash flows of $150,000 per year. For approximately how much would they need to sell the building for at the end of the 5th year to reach break-even NPV? Garcia uses a discount rate of 10% for projects of this type.

• A) $3,750,000
• B) $5,755,936
• C) $6,331,530
• D) $6,964,683

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Definitions:

End Customer

The final consumer of a product or service who does not intend to resell it; the ultimate user in the distribution chain.

Value

The importance, worth, or usefulness of something, perceived by individuals or markets, often influencing decisions and preferences.

Integrated Supply Chain

An Integrated Supply Chain is a coordinated system where all the processes involved in producing and delivering a product to the consumer are linked to reduce costs and improve efficiency and customer satisfaction.

Relationship-based

An approach focusing on building and maintaining positive connections with individuals or entities.