You are an employee of University Consultants, Limited, and have been given the following assignment. You are to present an investment analysis of a small retail income-producing property for sale to a potential investor. The asking price for the property is $1,290,000; rents are estimated at $165,120 during the first year and are expected to grow at 2.5 percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A fully amortizing 70 percent loan can be obtained at 7 percent interest for 30 years (total annual payments will be monthly payments x 12). The property is expected to appreciate in value at 3 percent per year and is expected to be owned for five years and then sold. Required: a. What is the first-year debt coverage ratio? b. What is the terminal capitalization rate? c. What is the investor's expected before-tax internal rate of return on equity invested (BTIRR)? d. What is the NPV using a 13 percent discount rate? e. What is the profitability index using a 13 percent discount rate?

You are the financial manager of the firm LAB.inc which does research in the medical field, your company needs an estimate of a financing plan for a research project. The research project according to the evaluation of the experts will be spread over a period of 4 years. The annual funding required to conduct this research is $100,000 at the beginning of each year. The firm has set a term of 7 years to raise the necessary funds to finance this research, the nominal interest rate is 8% capitalized quarterly. 1. How much does the company need to save at the end of each month to fund this research in 7 years? 2. Draw the timeline for this financing plan by presenting all the relevant elements. If the firm wants to start financing the research project today t=0, by taking out a bank loan equal to the VA of all the financing needs of the research project (for the 4 years). 3. Calculate the amount of monthly payments that the firm must pay to repay this bank loan for a period of 5 years?

Based on what was reviewed in class, please submit a BOE analysis for the multi tenant retail center based on the information below. Please determine the Net Operating Income of this property. Also, what price would you pay for this property, if you wanted to achieve a 5% Cap Rate (Capitalization Rate)? NOTE: Common Area Maintenance (CAM) paid by tenants are $0.67 Per Square Foot, Per Month. Assume 5% Vacancy Rate. BOE Analysis - Assignment.png

Zenith Investment Company is considering the purchase of an office property. It has done an extensive market analysis and has estimated that based on current market supply or demand relationships, rents, and its estimate of operating expenses, annual NOI will be as follows:  Year NOI 1 $ 1,030,000 2 1,030,000 3 1,030,000 4 1,210,000 5 1,260,000 6 1,310,000 7 1,349,000 8 1,389,170 A market that is currently oversupplied is expected to result in cash flows remaining flat for the next three years at $1,030,000. During years 4, 5, and 6, market rents are expected to be higher. It is further expected that beginning in year 7 and every year thereafter, NOI will tend to reflect a stable, balanced market and should grow at 3 percent per year indefinitely. Zenith believes that investors should earn a 12 percent return (r) on an investment of this kind.Required: a. Assuming that the investment is expected to produce NOI in years 1 to 8 and is expected to be owned for…

You are an employee of University Consultants, Limited, and have been given the following assignment. You are to present an investment analysis of a small retail income-producing property for sale to a potential investor. The asking price for the property is $1,430,000; rents are estimated at $183,040 during the first year and are expected to grow at 2.5 percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A fully amortizing 70 percent loan can be obtained at 8 percent interest for 30 years (total annual payments will be monthly payments × 12). The property is expected to appreciate in value at 4 percent per year and is expected to be owned for five years and then sold. Required: a. What is the first-year debt coverage ratio? b. What is the terminal capitalization rate? c. What is the investor's expected before-tax internal rate of return on equity invested (BTIRR)? d. What…

The market value of the property that you own is $15 million. The gross annual rental income for this property is $600,000. The tax rate is 28% . The set up costs (renovations ect) in order to use the building and land for your own business operations are $7,000,000. The annual revenue if you were to use the building forr your own business operations with low demand would be $5 million and have a 30% chance of occuring. The annual revenue if you were to use the building for your own business operations with medium demand would be $9 million and have a 40% chance of occuring. he annual revenue if you were to use the building for your own business operations with high demand would be $13 million. The variable costs (% of revenue) is 65 %. The fixed costs are $2.5 million. The costs of capital is 10% and the risk free rate is 3%. he initial cost for setting up the expansion of business can be fully depreciated over 10 years using the straight-line method. The value of land will be…

You are an investor buying an existing office building. You determine that year 1 NOI will be $44,000 and that you the going in CAP rate is 4.1%. Using the Direct Capitalization approach, what is the estimated value of the building? You also determine that the Effective Gross Income will be $80,000 and the Effective Gross Income Multiplier is 13. What is the value using the EGIM muliplier approach? You also determine that the Annual Debt Service is 35,000. What is the Debt Service Coverage Ratio?

Athena Investment Company is considering the purchase of an office property. After a careful review of the market and the leases that are in place, Athena believes that next year’s cash flow will be $100,000. It also believes that the cash flow will rise in the amount of $5,000 each year for the foreseeable future. It plans to own the property for at least 10 years. Athena believes that it should earn a return (r) of at least 11 percent. Athena estimates the value of the property today to be $1,224,808.   What is the current, or going-in, cap rate for this property?   A. 11.05%   B. 10.49%   C. 8.57%   D. 8.16%

Emmons Lawn Maintenance (ELM) provides lawn and garden care for residential properties. In the current year, ELM maintains 76 properties and earns an average of $5,200 annually for each property. The owner of ELM is planning for the coming year. New building in the area is expected to increase volume by 21 percent. In addition, the owner estimates that the number of homeowners that will want ELM's service will increase by 11 percent. ELM plans to increase the price of service by 13.0 percent to cover expected increased wage and equipment costs. Required: Estimate revenues for Emmons Lawn Maintenance for the coming year. Note: Enter your answer rounded to the nearest whole dollar.

Rundle Camps, Inc. leases the land on which it builds camp sites. Rundle is considering opening a new site on land that requires $3,200 of rental payment per month. The variable cost of providing service is expected to be $7 per camper. The following chart shows the number of campers Rundle expects for the first year of operation of the new site: Jan. Feb. 210 290 Mar. Apr. May June July Aug. 270 240 420 540 690 690 Answer is complete but not entirely correct. February August Sept. Oct. 390 420 Required Assuming that Rundle wants to earn $8 per camper, determine the price it should charge for a camp site in February and August. (Do not round Intermediate calculations.) Price S 27 Ⓡ S 20 X Nov. 300 Dec. Total 340 4,800