You are considering the acquisition of a small office building. The purchase price is $575,000. Seventy percent of the purchase price can be borrowed with a 30-year, 4.5 percent mortgage. Payments will be made annually. Up-front financing costs will total three percent of the loan amount. The expected before-tax cash flows from operations--assuming a 5-year holding period-are as follows: Year BTCF 1 2 3 4 $51,800 55,600 63,200 68,700 $73,800 5 The before-tax cash flow from the sale of the property is expected to be $225,000. What is the net present value of this investment, assuming a 9 percent required rate of return on levered cash flows (rounded to $Thousands)?

You are considering the acquisition of a small office building. The purchase price is $575,000. Seventy percent of the purchase price can be borrowed with a 30-year, 4.5 percent mortgage. Payments will be made annually. Up-front financing costs will total three percent of the loan amount. The expected before-tax cash flows from operations--assuming a 5-year holding period-are as follows: Year BTCF 1 2 3 4 $51,800 55,600 63,200 68,700 $73,800 5 The before-tax cash flow from the sale of the property is expected to be $225,000. What is the net present value of this investment, assuming a 9 percent required rate of return on levered cash flows (rounded to $Thousands)?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 14P

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