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.

Q: A development company would like to purchase a group of condominiums with an annual cash flow of…

A: The maximum amount that the company can pay is the present value of the all cash flows that can be…

Q: You are promised an 8 year streams of income from buying a new technology at the initial amount of…

A: Step 1 Given a certain rate of return, present value (PV) is the current value of a prospective…

Q: One real estate sales technique is to encourage customers or clients to buy today because the value…

A: “Since you have posted a question with multiple subparts, we will solve first three subparts for…

Q: You are considering the purchase of real estate that will provide perpetual income that should…

A: T-bill rate is like Risk free Rate = 6%  Expected Market Return = 12%

Q: Para Co. is reviewing the following data relating to an energy saving investment proposal: • Cost…

A: Annual Savings refers to the quantifiable savings that occurred during any one annual savings cycle…

Q: A property is being valued as if it will yield a perpetual annual stream of profits, starting 2…

A: Perpetuity is the stream of cash flows or payments that are made at equal intervals that do not have…

Q: Consider a property that is expected to produce a constant net operating ind year in perpetuity. An…

A: Future Value is calculated by FV function in excel, where PV is current price, NPER is number of…

Q: You purchased a warehouse eight years ago for P3.5M. Since then you had rented it out for…

A: Future value of a present value is the value of that amount after taking into account the time value…

Q: You purchase a brand-new property that had an NOI of $12 million last year (year 0). NOI is expected…

A: Given NOI of the property last year = $12,000,000 NOI current year=12000000*(1.05)=12600000

Q: You are buying an investment property for $362,854 today. Through research, you have determined that…

A: It can be calculated using =NPER(rate,pmt,pv,[fv],[type]) Rate The interest rate for the loan. Nper…

Q: An investor has invested $250,000 in a new rental property. Her estimated annual costs are $6000 and…

A: Net present worth: It is the present value (PV) of the cash inflows compared to the initial value of…

Q: You are looking at an investment which has an initial cost of $400,000 and a salvage value of zero…

A: Average accounting return is calculated by dividing average net income by average investment.…

Q: A property is bought for Php10000 and yields a Php1000 yearly profit. If it is sold after 5 years,…

A: For determining the break even we will have to find the NPV and at break even NPV should be nil.

Q: Clyde Corp is considering the purchase of a new piece of equipment. The cost savings from the…

A: Following formula used for answering above questions: Accounting rate of return = Annual Income /…

Q: You have the chance to purchase an oil well. Your best estimate is that the oil well’s net…

A: Amount to be paid for the investment = Annual cash inflows * Present value annuity factor (5%, 5…

Q: ABC Co is considering either leasing or buying a new freezer unit. The unit costs $6.4 million and…

A: When one company lends another company to use the assets for a particular time period, for which the…

Q: An environmental testing company needs to purchase equipment 2 years from now and expects to pay…

A: The present value of the annuity is the current value of the future payments that are calculated…

Q: Suppose your firm is considering buying a van costing $95,000. What is the Undepreciated capital…

A: Proportional Tax- A proportional tax, such as a sales tax, is a sort of proportional tax. All…

Q: You are considering buying a new tractor that costs $275,000 that is expected to last five years.…

A:

Q: It is estimated that a timber tract will yield an annual profit of P100,000 for 6 years, at the end…

A: The value of an asset purchased should be on par with its future profits and expected return. Thus,…

Q: Let's say you have a project which will cost $25mm to build or buy.  It will produce after-tax cash…

A: IRR refers to internal rate of return. It is an important concept in corporate finance. It is used…

Q: You invest $1,400 today and expect to sell your investment for $3,200 in 10 years.   a-1.…

A: Present Value is the current value of a cash flow that can be occurred in future. To find the…

Q: Suppose that annual income from a rental property is expected to start at P65,000 per year and…

A: For Solving This Question 1. we have to calculate the present value of cash inflow 2. Cash inflow…

Q: Better Corporation can purchase a piece of equipment now for $120,000 or buy it 4 years from now for…

A:

Q: An investor is considering the purchase of a rental house for $120,000. The house generates monthly…

A: The expected return is the annualized return from this investment over a period of 5 years. This is…

Q: An investor is considering the purchase of a rental house for $120,000. The house generates monthly…

A: given, house price = $120,000 monthly rent = $1,150 operating expense=$4800 years = 5 selling price…

Q: Para Co. is reviewing the following data relating to an energy saving investment proposal: Cost…

A: The projected worth of a fixed asset after the end of its lease term or usable life is known as the…

Q: Hotel Today Ltd. is thinking of buying a real estate asset. The asset's projected stabilized NOI for…

A: The appropriate price would be present value of operating income and growth of net operating income…

Q: Instructions: In parts a, b, and d round your answers to 2 decimal places. If you are entering any…

A: Expected rate is the considering the mean rate considering the probability of event happening.

Q: An investor is considering the purchase of a rental house for $120,000. The house generates monthly…

A: IRR is the rate of return a project generates through its lifetime expressed in annual terms. It is…

Q: You plan to purchase an office space in Chamblee's Chinatown for $50,000 at the end of year 2021.…

A: Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only one…

Q: Consider the following two investment alternatives. Determine the range of investment costs for…

A: Annual Worth analysis is the estimation of discounted cash flows generated or incurred over the…

Q: You are considering the purchase of real estate that will provide perpetual income that should…

A: Perpetual Income =$54000 Risk Free Rate = 6% Market Return = 9% Market Risk Beta = 1 Property Risk…

Q: Assume that an investment, with a single initial cost of $1,000 and a yield of $50 monthly for 10…

A: IRR is one of the toll for capital budgeting where, NPV of cash flow is zero. The best way to solve…

Q: You are considering the purchase of real estate that will provide perpetual income that should…

A: Return from the investment depends upon the degree of risk involved it. Real estate investments are…

Q: With the estimates shown below, Sarah needs to determine the trade-in (replacement) value of machine…

A: EAC of cost machine X =(Cost-Salvage value)×Discount rate(1-(1+Discount rate)-n+Salvage…

Q: Your company is considering purchasing an expensive plece of equipment. The manufacturer of the…

A: Present Value:  The present value is the value of cash flow stream or the fixed lump sum amount at…

Q: ex Unlimited is working upon the renovation of its factory upcoming year and for they expect an…

A: In BCR ratio analysis we can calculate the annual cost and annual benefits and find out the ratio of…

Q: ali business with 780000 is expected to grow at 10% per year compounded annually for the next 4…

A: Expected future value can be defined as the value of the fund over a future time period with respect…

Q: 1. You are considering the purchase of an apartment building with the following information:…

A: It is given that: Purchase price - $12,500,000 Year 1 NOI - $1,000,000 Growth – 4% Holding period –…