Required: a. Based on the fact that the project appears to have 9,360 square feet of surface area in excess of zoning requirements, the developer could make an argument to the planning department for an additional 10 units, 250 units in total, or 25 units per acre. What is the percentage return on total cost under the revised proposal? Is the revised proposal financially feasible? b. Suppose the developer could build a 240-unit luxury apartment complex with a cost of $83,000 per unit. Given that NOI is 60% of rents. What would such a project have to rent for (per square foot) to make an 8 percent return on total cost? Comm this question by entering your answers in the tabs below

Required: a. Based on the fact that the project appears to have 9,360 square feet of surface area in excess of zoning requirements, the developer could make an argument to the planning department for an additional 10 units, 250 units in total, or 25 units per acre. What is the percentage return on total cost under the revised proposal? Is the revised proposal financially feasible? b. Suppose the developer could build a 240-unit luxury apartment complex with a cost of $83,000 per unit. Given that NOI is 60% of rents. What would such a project have to rent for (per square foot) to make an 8 percent return on total cost? Comm this question by entering your answers in the tabs below

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 10E: Roberts Company is considering an investment in equipment that is capable of producing more...

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The investor-developer would not be comfortable with a 7.8 percent return on cost because the margin for error is too risky. If construction costs are higher or rents are lower than anticipated, the project may not be feasible. The asking price of the project is $4,600,000 and the construction cost per unit is $80,400. The current rent to justify the land acqusition is $1.3 per square foot. The weighted average is 900 square feet per unit. Average vacancy and Operating expenses are 5% and 35% of Gross Revenue respectively. Based on the fact that the project appears to have 9,360 square feet of surface area in excess of zoning requirements, the developer could make an argument to the planning department for an additional 10 units, 250 units in total, or 25 units per acre. What is the percentage return on total cost under the revised proposal? Is the revised proposal financially feasible? What is the Return on total cost under the revised proposal? Additional information below: Physical…
The investor-developer would not be comfortable with a 7.8 percent return on cost because the margin for error is too risky. If construction costs are higher or rents are lower than anticipated, the project may not be feasible. The asking price of the project is $4,600,000 and the construction cost per unit is $80,400. The current rent to justify the land acqusition is $1.3 per square foot. The weighted average is 900 square feet per unit. Average vacancy and Operating expenses are 5% and 35% of Gross Revenue respectively. Based on the fact that the project appears to have 9,360 square feet of surface area in excess of zoning requirements, the developer could make an argument to the planning department for an additional 10 units, 250 units in total, or 25 units per acre. What is the percentage return on total cost under the revised proposal?
The management of Penfold Corporation is considering the purchase of a machine that would cost $310,000, would last for 6 years, and would have no salvage value. The machine would reduce labor and other costs by $60,000 per year. The company requires a minimum pretax return of 12% on all investment projects. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed project is closest to (Ignore income taxes.): (Round your intermediate calculations and final answer to the nearest whole dollar amount.)
The investor-developer would not be comfortable with a 7.8 percent return on cost because the margin for error is too risky. If construction costs are higher or rents are lower than anticipated, the project may not be feasible. The asking price of the project is $4,600,000 and the construction cost per unit is $80,400. The current rent to justify the land acqusition is $1.3 per square foot. The weighted average is 900 square feet per unit. Average vacancy and Operating expenses are 5% and 35% of Gross Revenue respectively. Use the following data to rework the calculations in Concept Box 16.2 9(please see screen shots attached to question) in order to assess the feasibility of the project: Required: a. Based on the fact that the project appears to have 9,360 square feet of surface area in excess of zoning requirements, the developer could make an argument to the planning department for an additional 10 units, 250 units in total, or 25 units per acre. What is the percentage return on…
The management of Basler Corporation is considering the purchase of a machine that would cost $440,000, would last for 5 years, and would have no salvage value. The machine would reduce labor and other costs by $128,000 per year. The company requires a minimum pretax return of 12% on all investment projects. Required: Determine the net present value of the project. Use the factor of 3.605 for the discount rate of 12% as present value of annuity in 5 years.
management of Penfold Corporation is considering the purchase ofa machine that would cost $380,000, would last for 5 years, and would have no salvage value. The machine would reduce labor and other costs by $85,000 per year. The company requires a minimum pretax return of 13% on all investment projects. The Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed project is closest to (Ignore income taxes.): Multiple Cholce $(81,055) $(6,055) $(166,055) $(379.997) Prev 1 of 4 Next > 9:44 AM ype here to search 49°F Mostly sunny 20 10/19/2021 DELL F11 F12 PrtScr Insert Delete PgUp PgDn Home End F3 F4 F5 F6 F7 F8 F9 F10 %24 & Num Lock Backspace 大
A company is considering purchasing an equipment for $136,840. Shipping and installation costs would cost another $6,599. The project would require an initial investment in net working capital of $21,243 which would be recouped at the end of the project. What is the project's initial outlay? Do not enter $ or comma in the answer answer. Enter your final answer of initial outlay as an absolute number (that means, enter it as a positive number).
A project has an up-front cost of sh.1000, 000. The project's WACC is 12% and its net present value is sh.100, 000. Which of the following statements is most correct? Select one: A. The project should be rejected since its return is less than the WACC B. The project's internal rate of return is greater than 12 percent C. The project's modified internal rate of return is less than 12 percent D. All of the statements above are correct E. None of the statements above is correct
A firm has only $10,000 to invest and must choose between two projects. Project A returns $12,400 after a year while project B pays $15,609 after three years. If management wants to select the investment with the higher return, which alternative should be chosen? Calculate the return for each investment and indicate which option provides the higher return and explain why.
Management is considering two alternatives. Alternative A has projected revenue per year of $100,000 and costs of $70,000 while Alternative B has revenue of $100,000 and costs of $60,000. Both projects require an initial investment of $250,000 of which $75,000 has already been set aside and will be used as a down payment on the project that is chosen. There are also other qualitative factors that management must consider before making a final choice.Required: Which of the following statements is correct about relevant costs and relevant revenues. a. The sunk cost of $75,000 is relevant b. The projected revenues are relevant to the decision c. The only relevant item are the costs as they differ between alternative d. The initial investment of $250,000, the projected revenues, and the projected costs are all relevant
Cendrawasih Inc. is considering replacing the equipment it uses to produce crayons. The equipment would cost RM1.37 million, have a 12-year life, and lower manufacturing costs by an estimated RM304,000 a year. The equipment will be depreciated using straight-line depreciation to a book value of zero. The required rate of return is 15 percent and the tax rate is 35 percent. Determine the net income from this proposed project.
Trovato Corporation is considering a project that would require an investment of $62,000. No other cash outflows would be involved. The present value of the cash inflows would be $77,500. The profitability index of the project is closest to (Ignore income taxes.): Multiple Choice 0.75 O O 0.20 0.25 1.25