Contemporary Engineering Economics 6th Edition by Chan Park

تمرين 18

A real-estate developer seeks to determine the most economical height for a new office building, which will be sold after five years. The relevant net annual revenues and salvage values on after-tax basis are as given in Table.
(a) The developer is uncertain about the interest rate ( i ) to use, but is certain that it is in the range
TABLE 4
from 5 to 30%. For each building height, find the range of values of i for which that building height is the most economical.
(b) Suppose that the developer's interest rate is known to be 15%. What would be the cost (in terms of net present value) of a 10% overestimation of the resale value (In other words, the true value was 10% lower than that of the original estimate.)