Assume that you purchase a property for $500,000 and it generates annual cash flows of $30,000 in Years 1-3; and $75,000 in Years 4 & 5. You are able to sell it at the end of Year 5 for $600,000. Calculate the IRR for this investment property.
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Assume that you purchase a property for $500,000 and it generates annual
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- You are planning to invest in three mutually exclusive investment projects, A, B and C, which have the following after-tax cash flows: Cash Flow, per year ($) Investment 0 1 2 3 4 Thereafter A (12,000) 5,000 5,000 5,000 5,000 50 B (12,000) 0 0 0 20,000 50 C (12,000) 5,000 5,000 11,000 11,000 50 Assume that your required rate of return is 6.5 percent: Apply the present-value technique to assess the acceptability of each investment.The direct capitalization method can be used to quickly value a building. You are evaluating a property that produces gross rent of $524,000 per year with an expected NOI of $247,000 per year. Similar properties have traded with a cap rate of 4.5% and and a GIM of 8.5. What is the value of the subject property based on the direct capitalization method?You paid $725,000 for a duplex and financed 75% of the purchase price. Your forecasted cash flows for the property are listed below and you expect to sell the property for $740,000 at the end of year 5 and you owe $499,318.73 on the property. What is your expected internal rate of return? Cash flow - year 1 $16,000 Cash flow - year 2 $17,000 Cash flow - year 3 $16,000 Cash flow - year 4 $15,000 Cash flow - year 5 $18,000 Answer should be formatted as a percent with two decimal places.
- Suppose an investor is interested in purchasing the following income producing property at a current market price of $ 1,490,000. The prospective buyer has estimated the expected cash flows over the next five years to be as follows: Year 1 = $88,000, Year 2 = $90,662, Year 3 = $91,923, Year 4 = $95,778, Year 5 = $97,000. Assuming that the required rate of return is 15% and the estimated proceeds from selling the property at the end of year five is $1,860,000, what is the NPV of the project? What is the IRR of the project?Assume that you are valuing an infinitely lived asset that pays $350 at the end of each year. What is the present value of the asset if the opportunity cost of funds is 3%?Assume that property investor expects NOI to be $55 000, $64 000 and $67 000 for next 4 years with capitalisation rate of 11%, holding period expected to be 32 years with annual appreciation of 3% and sale commission of 6%. Would you buy the property if owners would like to sell it for $520 000?
- You are offered an asset that costs $150,000 and has cash flows of $1,350 at the end of every month for the next 6years. Assume the cost of capital is 9percent per year.a. What is the IRR of the asset?b. What is the NPV of the asset? c. If your cost of capital is 12percent, should you purchase it? (Setup cash flows in Excel spreadsheets and uses the following Excel Financial functions, IRR, and NPV to derive your answers.A potential project involves an initial investment in machinery of RO.1,000,000 and has the following cash inflows:Year 1 – RO.250,000Year 2 – RO.350,000Year 3 – RO.200,000Year 4 – RO.400,000At the end of year 4, the machinery will be sold for RO.600,000.Calculate the accounting rate of return based on average investment.NOTE (DEDUCT THE DEPRECIATION TO ARRIVE AT THE CORRECT AVERAGE PROFIT) a. None of the options b. 35% c. 20% d. 25% Clear my choiceYou 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
- Let us assume that an investor can obtain an 80% LTV loan for a property valued at 500,000 at a 10% interest rate to be amortized over 25 years with monthly payments. If the property generates $70,000 net operating income per year, answer the following. What would be the Before-Tax Cash Flow from the Property Sale (BTCFs) if the property were sold in Year 5 for $440,000? $63,344.93 $816,655.07 $396,382.36 $440,000.00A piece of property is to be purchased at $305,000 for mining a precious metal. The annual net income of the mining operation will be $100,000 for 10 years. At the ten of the 10 years, the property will be restored into a park at a cost of $750,000 more than the resale value of the property after it is restored .a. Draw a cash flow diagram for this investment, using a 10% Interest rate.b. Determine whether the project is desirableA tract of land is expected to net $45 per acre from now into the foreseeable future. Assume that your opportunity cost is 6% or 0.06 and that your cost of borrowed funds is 5% or 0.05. You are required to repay any borrowed funds over a 30 year period with 30 equal annual payments. Assume that you have $250,000 to invest in land. Determine: • The maximal price you could pay for the land and still generate a rate of return equal to your opportunity cost. • The minimal per-acre down payment required if the investment is to "cash flow" in the first year. • The maximal number of acres you can purchase and meet the lender's "cash-flow" requirements. Please show all work without using excel. Thank you!