(Oscar’s Office Building) Oscar is considering getting into the real estate business. He’s looking..
(Oscar’s Service Building) Oscar is regarding getting into the genuine domain service. He’s looking at buying an bulky service edifice for $1.8 favorite in money. He wants to respect what his restore on invested excellent (ROIC) get be on an annual premise. The edifice has 14,000 balance feet of divulsionable room. He’d enjoy to set the divulsion at $4.00 per balance pavement per month. However, he knows that call-for depends on value. He respects that the percentage of the edifice he can rise roughly follows the equation (divulsion is %in Odoclcluaprsi epde =r s 2q u−a r0e. 3fo ×o tR peenrt month) So, at $4.00, Oscar thinks he can rise about 80 percent of the service room. Oscar considers two categories of costs: changeable costs, which are a duty of the balance feet niggardly, and unwandering costs. Unwandering costs get be $8,000 per month and enclose such items as prophylactic, defence, and pawn. Changeable costs overspread such things as electricity and ebullition and run $1.25 per month for each balance pavement niggardly.
a. Draw an ROIC (restore on invested excellent) tree for the troop. [6.2]
b. What is the ROIC? [6.2]
c. What would be the new ROIC be if Oscar decides to impeach divulsion of $5.00 per balance pavement per month? [6.3]