An income-producing property is expected to yield NOI of $100,000 in each of the next five years, with cash flows being received at the end of each period. At the end of the fifth year the property will be sold; the owner wishes to use a going-out cap rate of 7.3% for this transaction. For a cost of capital of 9.5% annually, what is the value of this property today? Your Answer: or

An income-producing property is expected to yield NOI of $100,000 in each of the next five years, with cash flows being received at the end of each period. At the end of the fifth year the property will be sold; the owner wishes to use a going-out cap rate of 7.3% for this transaction. For a cost of capital of 9.5% annually, what is the value of this property today? Your Answer: or

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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Jones expects an immediate investment of $91,461.30 to return $21,000 annually for six years, with the first payment to be received one year from now. What rate of interest must Jones earn? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round "Table Factor" to 4 decimal places.) Present Value 91,461.30 $ Annuity Payment Table Factor Interest Rate = %
Consider an income producing property that according to your assumptions and estimations is currently worth $4M on an unlevered basis when a 7.5% required rate of return is applied. One of the assumptions that you have made when arriving at that estimate is that you will sell the property in 6 years for a CAP of 8%, which translates to $4.4M at that future point in time. a. At what price will you sell the property in 6 years if all your assumptions materialized except that you will sell the property for a CAP of 7% instead of 8%? Show your calculations. b. All other things equal, by how much the situation described in part a affects the current value of the property.
A tract of land is expected to net $45 per acre from now into the foreseeable future. Assume that your opportunity cost is 6% or 0.06 and that your cost of borrowed funds is 5% or 0.05. You are required to repay any borrowed funds over a 30 year period with 30 equal annual payments. Assume that you have $250,000 to invest in land. Determine: • The maximal price you could pay for the land and still generate a rate of return equal to your opportunity cost. • The minimal per-acre down payment required if the investment is to "cash flow" in the first year. • The maximal number of acres you can purchase and meet the lender's "cash-flow" requirements. Please show all work without using excel. Thank you!
The asking price of an acre of farmland is currently $1,050 per acre. The investor's nominal cost of capital is 8.5% and the planning horizon is 20 years. The inflation rate for current returns is 3% and for land values is 2%. Assume a tax rate of 25% and debt financing. Assume a 30% down payment, 8% loan interest rate, equal payment method and a 25 year amortization period. Do Not Use a blended cost of capital. What is the current (first year) Net Cash Flow required to achieve an NPV of zero. Round to the nearest dollar.
The annual profit from an investment is $20,000 each year for 5 years and the cost of investment is $80,000 with a salvage value of $40,000. The discount rate (cost of capital) at this risk level is 14%. (round your response to the nearest Based on the given information, the net present value of the investment = $ whole number).
Project A costs $5,200 and will generate annual after-tax net cash inflows of $1,700 for five years. What is the NPV using 5% as the discount rate? Round your present value factor to three decimal places and final answer to the nearest dollar.
The JLK Corporation is considering an investment that will cost RM80,000 and have a useful life of 4 years. During the first 2 years, the net incremental after-tax cash flows are RM25,000 per year and for the last two years they are RM20,000 per year. Calculate the payback period for this investment using a table.
You have bought property today for $600,000. You have estimated that it will provide monthly net cash flows of $10,000 and you think you could sell it for $800,000 in 5 years. What is the implied rate of return on this property?
You are considering two mutually exclusive projects with unequal lives. One of the projects has an up-front cost of $59,000 (CF0= -59,000) and produces positive after-tax cash inflows of $21,000 a year at the end of each of the next 5 years. Assuming the cost of capital is 9.2%, what is the equivalent annual annuity of the project?
An investor pays $275,000 for a mine that will produce level annual revenue for 18 years. What should the level annual revenue be (received at the end of each year) if the investor is to receive 4% annual return on the investment while recovering the principal in a sinking fund earning 2.5% per year?
A neighborhood shopping center is expected to generate after-tax cash flow of $750,000 per year (at end of year) indefinitely. If an interested buyer has a cost of money of 13 %, how much will he be willing to pay for this shopping center? A $6.64 million B) $7.50 million $5.77 million D $2.21 million
You are evaluating purchasing the rights to a project that will generate after tax expected operating cash flows of $91k at the end of each of the next five years, plus an additional $1,000k non-operating terminal period cash flow at the end of the fifth year. You can purchase this project for $531k. If your firm's cost of capital (aka required rate of return) is 14.3%, what is the NPV of this project? Note: All dollar values are given in units of $1k = $1000. Provide your answer in units of $1000, thus, $15000 = 15k and thus you should enter 15 for your answer.

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