Each unit is projected to generate net cash flows of 516615


Malik Properties has three separate investment choices with a 16% corporate hurdle rate and $60,000 to apply to capital investments. Choice 1 is to buy a lease on warehouse space for $30,000 that could be sublet to an already identified tenant generating net cash flows of $7,925 per year for 5 years paid at the start of each year. Choice 2 is to buy a lease on one or two fast food restaurants from an estate that is projected to settle in nine years. Each restaurant lease costs $20,000 and will generate net cash flows of $6,700 per year with all lease payments being made in arrears. Choice 3 is to buy units within a flexible space office building. There are currently 4 identical units available which can be acquired in any whole unit quantity for $10,000 per unit. Each unit is projected to generate net cash flows of $5,166.15 per year for seven years. How should Malik Properties proceed and why?

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Finance Basics: Each unit is projected to generate net cash flows of 516615
Reference No:- TGS0621578

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