1. You are considering the purchase of an apartment building with the following information: Purchase price Expected year 1 NOI Expected annual NOI growth Expected Exit Cap Rate Holding Period $12,500,000 $1,000,000 4% 8.5% 3 years Solve for each of the following: Initial (going in) cap rate Expected sales price end of year 3 Net Present Value at 9% Discount Rate IRR Would you buy this asset for $12,500,000? Why or why not?

1. You are considering the purchase of an apartment building with the following information: Purchase price Expected year 1 NOI Expected annual NOI growth Expected Exit Cap Rate Holding Period $12,500,000 $1,000,000 4% 8.5% 3 years Solve for each of the following: Initial (going in) cap rate Expected sales price end of year 3 Net Present Value at 9% Discount Rate IRR Would you buy this asset for $12,500,000? Why or why not?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Your firm is considering a number of mutually exclusive choices for a property that you recently acquired. The following are the projected cash flows for one of the projects over its seven-year life. Cash Flows 0 1 2 3 4 5 6 7 (600,000) 100,000 120,000 140,000 160,000 180,000 200,000 220,000 If the appropriate discount rate is 12%, what is the annualized Net Present Value for this option? (Do not round intermediate calculations and enter your answer in dollars with-no decimal places, e.g., 24316.)
2. Effective Annual Yield (EAY) and Effective Annual Rate (EAR) A. You plan to invest $10,000 for one year and you have the opportunity to invest it at a 12 percent APR, compounded monthly. Alternatively, you could invest the funds at an annual rate of 12.25 percent compounded semiannually. What is the EAY of each alternative? Which investment should be chosen? B. A car loan offered by Bank One requires quarterly payments and has an APR of 5.8 percent, whereas the same loan amount may be obtained from Bank Two at an APR of 6 percent with monthly payments. Which loan would you ch0oose and why?
need type anwer
music studio predicts its future yearly net income (loss) to be as follows: Year 1: - $120Year 2: + $20Year 3: + $90Year 4: - $10Year 5: + $30Year 6: + $30Year 7: + $30Year 8: + $40 What is the NPV of the company, considering a discount rate of 10%?
1. If the interest rate is 8% per year, what decision would you make based on the decision tree diagram in Figure below. (0.6) Introduce New Product $200,000 profit per year for six years, starting at EOY 3 -$1,000,000 at ΕΟΥ 2 (0.4) $280,000 profit per year for six years, starting at ΕΟΥ Year 0 $0 profit/yr. for 8 years Do Nothing
10. You are considering buying an asset which will give you two payments, one payment for one year later and the other for two years later. Assume that the asset pays you $8,000 (sure amount) one year later, but two years later cither $6,000 with the probability of 1/2 or $4,000 with the probability of 1/2. Then what would be the fair price of this asset assuming thati=10%? (How much are you willing to pay now for this asset?
1. Your client has been offered the opportunity to invest in a project which will pay $1,000 per month at the end of months 1 to 10 and $2,000 per month at the end of months 21 to 30. The interest rate over the period of the investment is a nominal rate of 8% p.a. If your client can buy the investment today for $25,000 would you recommend that this is a good investment? Why or why not?
Please show working Someone promises to pay you $1,000 in years 5, 10 and 15 for a total of $3,000. Assume your required return is 8%. a. what is the duration of this promise to pay you $3,000 over 15 years? b. what's the convexity? c. using the duration estimate alone, what is the estimated percentage price change in t=0 value if rates are expected to increase 2%?
You have the opportunity to invest in a project with the following cash flows. Initial investment/Outlay today: $11,000. Cashflow back to you in 1 year $6000 Cashflow back to you in 2 years $5000 Scrap Value in 2 years $500 Assume interest rates are 5% in the 1 year and 7% in the 2 year. (tip: use the spreadsheet “NPV” from Moodle to helpin your calculations) a. Calculate the NPV of the project (show formula/workings)? b. Should you invest in this project? Why ?
What would you be ready to spend now for a P1,250 annual return over the following ten years, assuming a discount rate of 12%?A. P4,062.75B. P5,062.75C. P6,062.75D. P7,062.75E. None of the above.
(Present-value comparison) You are offered $1,300 today, $6,000 in 10 years, or $26.000 in 23 years. Assuming that you can earn 9 percent on your money, which offer should you choose? a. What is the present value of $26,000 in 23 years discounted at 9 percent interest rate? (Round to the nearest cent) b. What is the present value of $6,000 in 10 years discounted at 9 percent interest rate? $(Round to the nearest cent) c. Which offer should you choose? (Select the best choice below) OA. Choose $6,000 in 10 years because its present value is the highest OB. Choose $1,300 today because its present value is the highest OC. Choose $26.000 in 23 years because its present value is the highest Com

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