Suppose a businessman is considering the purchase of a business machine that is expected to be obsolete in five years. The machine is worth Php 100,000.00. The prevailing rate of interest is 15% per year. Suppose he made an estimate of his gross yearly income as follows:   Year  Income  1  Php 20,000.00  2  Php 25,000.00  3  Php 35,000.00  4  Php 30,000.00  5  Php 28,000.00  Is the business profitable? Why or why not?

Consider the following data showing the cash flows per year from a real estate property: Year: 1 2 3 4 5 Cash Flow: $21,000 $22,000 $23,000 $24,000 $25,000 After the 5th year, cash flows are expected to rise at a constant rate of 2.5% per year for the many years in the future. Your cost of money (interest paid on the loan) is 5.5% per year. A. Calculate the appraisal value of the house. B. Define and calculate the cap rate. Explain what it means. (Answer with respect to Excel for both)

You have been asked to estimate the market value of an income-producing property. The table below provides 5 years of projected cash flows for the property. Use the discounted cash flow approach to income valuation to calculate the market value. Assume that you sell the property at the end of year 5 and that the net proceeds from the sale are $5 million. Also assume that the discount rate is 10%. PGI EGI NOI Year 1 $4.18 million $750,000 $780,000 $811,200 $637,500 $663,000 $689,520 $318,750 $331,500 $344,760 $6.11 million $4.12 million Year 2 $4.40 million Year 3 Year 4 $843,648 $717,101 $358,550 Year 5 $877,394 $745,785 $372,892

Nikul