Investment in Real Estate is a longterm investment which affect the cash flows position of the entity either positively or negatively. Required a). Discuss the above statement in the context of Real Estate Investment b). How can a Real Estate owner make provisions for value decline in the asset and what causes value decline c). Suppose the price of a house in year zero now is $5 million and the price of the house in one year's time will be $5.6 million. Calculate the expected rate of appreciation in the price of the house
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Investment in Real Estate is a longterm investment which affect the cash flows position of the entity either positively or negatively. Required
a). Discuss the above statement in the context of Real Estate Investment
b). How can a Real Estate owner make provisions for value decline in the asset and what causes value decline
c). Suppose the price of a house in year zero now is $5 million and the price of the house in one year's time will be $5.6 million. Calculate the expected rate of appreciation in the price of the house
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- I was thinking about the topic B. What would be the answer : b. Ignoring tax, depreciation, and the time value of money, determine how long it will take to recover (pay back) the investment. It will takeenter your response hereyears.(Enter your response rounded to two decimal places.)4. What factors should be considered when estimating a new business' NINV? Is it any different for an asset replacement project. 5. Why is depreciation, a noncash expense, considered when estimating a project's net cash flows? 6. What are the potential tax consequences of selling an old asset in an asset replacement investment decision?Suppose that you are attempting to value an income-producing property using the direct capitalization approach. Using data from comparable properties, you have determined the overall capitalization rate to be 7.0%, a reasonable discount rate of 9%, and an exit cap rate of 12%. If the projected first-year net operating income (NOI) for the subject property is $135,500, If the projected second-year net operating income (NOI) for the subject property is $145,500, and the projected final- year total cash flow for the subject property is $1,155,500 what is the indicated value of the subject using direct capitalization? Enter the answer below as an absolute value (a positive number), no dollar sign. Rounding to the nearest whole number (no decimal places) is ok. Your Answer: Answer
- The following proforma shows unleveraged cash flows for a property if an investor were to purchase it today and resell it at the end of the third year: (Show answer in Excel) What is the present value of the each of the discounted cash flows from Year 1, Year 2, and Year 3, using a discount rate of 8.75% (hint: calculate each on separately)? What is the Net Present Value of this investment?You are offered a chance to buy an asset for $4,000 that is expected to produce cash flows of $750 at the end of Year 1, $1,000 at the end of Year 2, $850 at the end of Year 3. and $6,250 at the end of Year 4. What rate of return would you earn if you bought this asset? Select the correct answer. a. 28.08% b. 26.48% с. 28.88% d. 25.68% e. 27.28%.Please select the option that best analyzes the WORKING CAPITAL for our example company. The working capital represents the amount of current assets available to settle our current liabilities. Our example company will definitely be able to pay their current liabilities as they come due. The working capital represents the amount of current assets available to settle our current liabilities. The current liabilities are not due for more than two years so our current asset amounts are inconsequential. The working capital represents the amount of current assets available to settle our current liabilities. Our example company will be unable to pay their current liabilities as they come due. The working capital represents the amount of current assets available to settle our current liabilities. We cannot determine if our example company will be able to pay their current liabilities as they come due.
- (Present value of an uneven stream of payments) You are given three investment alternatives to analyze. The cash flows from these three investments are as follows: End of Year 1 2 3 A $ 2,000 3,000 4 5 Investment B $1,000 1,000 4,000 1,000 (5,000) 1,000 5,000 5,000 (Click on the icon in order to copy its contents into a spreadsheet.) What is the present value of each of these three investments if the appropriate discount rate is 11 percent? с $ 4,000 4,000 (4,000) (4,000) 14,000 a. What is the present value of investment A at an annual discount rate of 11 percent? (Round to the nearest cent.)An investment firm is considering two alternative investments, A and B, under two possible future sets of economic conditions, good and poor. There is a .60 probability of good economic conditions occurring and a .40 probability of poor economic conditions occurring. The expected gains and losses under each economic type of conditions are shown in the following table: Economic Conditions Investment Good Poor A $900,000 –$800,000 B 120,000 70,000 Using the expected value of each investment alternative, determine which should be selected.Finding a present value is the reverse of finding a future value. Which of the following is true about finding the present value of cash flows? O Finding the present value of cash flows tells you what a cash flow will be worth in future years at a specified rate of return. O Finding the present value of cash flows tells you how much you need to invest today so that it grows to a given future amount at a specified rate of return. Which of the following investments that pay will $15,500 in 8 years will have a lower price today? O The security that earns an interest rate of 5.50%. O The security that earns an interest rate of 8.25%. Eric wants to invest in government securities that promise to pay $1,000 at maturity. The opportunity cost (interest rate) of holding the security is 6.80%. Assuming that both investments have equal risk and Eric's investment time horizon is flexible, which of the following investment options will exhibit the lower price? O An investment that matures in six…
- ou are given three investment alternatives to analyze. The cash flows from these three investments are as follows: Investment End of Year A B C 1 $ 2,000 $ 2,000 $ 6,000 2 3,000 2,000 6,000 3 4,000 2,000 (6,000) 4 (5,000) 2,000 (6,000) 5 5,000 6,000 16,000 a. What is the present value of investment A at an annual discount rate of 13 percent? b. What is the present value of investment B at an annual discount rate of 13 percent? c. What is the present value of investment C at an annual discount rate of 13 percent?Payback, Accounting Rate of Return, Present Value, Net PresentValue, Internal Rate of ReturnAll scenarios are independent of all other scenarios. Assume that all cash flows are after-tax cashflows.a. Kambry Day is considering investing in one of the following two projects. Either projectwill require an investment of $20,000. The expected cash flows for the two projects follow.Assume that each project is depreciable b. Wilma Golding is retiring and has the option to take her retirement as a lump sum of$450,000 or to receive $30,000 per year for 20 years. Wilma’s required rate of return is6%.c. David Booth is interested in investing in some tools and equipment so that he can doindependent drywalling. The cost of the tools and equipment is $30,000. He estimatesthat the return from owning his own equipment will be $9,000 per year. The tools andequipment will last 6 years.d. Patsy Folson is evaluating what appears to be an attractive opportunity. She is currentlythe owner of a small…Please answer Question 3 and Question 6. What would happen to net income and cash flow if depreciation were increased by $1.30 million? What would be the impact on cash flow if depreciation was $1.30 million and interest expense was $2.30 million?