4. An investor is considering the acquisition of a "distressed property" which is on Northlake Bank's REU list. The property is available for $200,000 and the investor estimates that he can borrow $160,000 at 8 percent interest and that the property will require the following total expenditures during the next year: Inspection %24 500 Title search 1,000 Renovation 13,000 Landscaping 800 Loan interest 12.800 Insurance 1,800 Property taxes 6,000 Selling expenses 8.000 a. The investor is wondering what such a property must sell for after one year in order to earn a 20 Page 2 percent return (IRR) on equity. What other issues must he consider?

4. An investor is considering the acquisition of a "distressed property" which is on Northlake Bank's REU list. The property is available for $200,000 and the investor estimates that he can borrow $160,000 at 8 percent interest and that the property will require the following total expenditures during the next year: Inspection %24 500 Title search 1,000 Renovation 13,000 Landscaping 800 Loan interest 12.800 Insurance 1,800 Property taxes 6,000 Selling expenses 8.000 a. The investor is wondering what such a property must sell for after one year in order to earn a 20 Page 2 percent return (IRR) on equity. What other issues must he consider?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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2
An investor purchased an auto body shop for $200,000 using a mortgage of 70 percent of the purchase price. The loan terms were: 6 percent interest rate, 25-year amortization period, 10-year term, 12 payments per year, and loan costs of 2 percent of loan amount. The buyer incurred acquisition costs of $8,000. At the time of purchase the original basis was allocated 75 percent for improvements and 25 percent for land. The projected NOI for year one is $25,000. This investor's marginal tax rate is 28 percent, so what is the cash flow after tax for year one of the projection? O $10,662 O $11,109 O $12,549 O $14,176
The purchase price for a new home was $325,000. The buyer put down 20% and the balance was a mortgage for 80% of the purchase price. value at the time of closing was $339,000 and the assessed value was $342,000. What will the buyer pay for one year's property taxes if the A. $8,125 B. $6,500 C. $8,550 D. $8,480
A Property is expected to have 5 Year NOI flow of $10,000, $12,000, $15,000, $18,000, and $10,000 and a final (year 5) sale price of $90,000. Using capitalization rate of 12% what is the estimated market value of the property? 97,354 104,664 87,641 100,919 90,724
Caddis Company acquired a building with a loan that requires payments of $19,000 every six months for 3 years. The annual interest rate on the loan is 8%. What is the present value of the building? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Multiple Choice O O O O $99,600 $114,000 $38,988 $65,402 $48,965
A property was purchased for $7060.00 down and payments of $1451.00 at the end of every year for 3 years Interest is 5% per annum compounded semi-annually What was the purchase price of the property? How much is the cost of financing? CID Trent has opened an RRSP account by making an initial deposit of $1000 He intends to make annual deposits for 19 years increasing at a constant rate of 2% How much of the accumulated value just after the last deposit was made is interest if interest is 8 5% compounded annually? The amount of interest included in the accumulated value is $ (Round the final answer to the nearest cent as needed Round all intermediate values in six decimal nlaces as needed i Satwinder deposited $145 at the end of each month for fifteen years at 7 5% compounded monthly. After her last deposit she converted the balance into an ordinary annuity paying $1200 every three months for twelve years. If interest on the annuity is compounded semi-annually what is the nominal rate of…
Written report with the following content: • Appendix1: Leasing Explain the calculations. Your recommendations Objective: Should FFT lease or construct their own production facility Option 1: Construct Costs to incur: Buying land, construct building and getting ready for use (FFT has these funds available in their bank account today so no mortgage is needed) $ 1,200,000 Taxes, insurance, and repairs (per year) $110,000 Intended years of use 15 Projected market value in 15 years $ 1,250,000 Option 2: Lease Intended years of use 15 Deposit required today (this deposit will be returned to FFT when the lease contract is complete is 15 years) $ 100,000 Annual lease payment $ 160,000 Property taxes (annual) to be paid by FFT $ 15,000 Insurance (annual) to be paid by FFT $ 15,000 Required rate of return 8% Methodology: The consulting team is proposing to perform a NPV analysis and determine the benefit to leasing or construction. Based on the analysis, they will recommend the preferred option…
am. 124.
Only typed answer READ CAREFULLY!!! CALCULATE THE BOOK VALUE FOR THE FIFTH YEAR. The company buys a research kit for $20,000. At the end of 9 years it can be sold for $600. Uses 60% bond depreciation along with MACRS. Prepare the depreciation schedule and use it to fill in the blanks. a) The book value for the fifth year is $______. b) Total depreciation for the first year is $____. c) Depreciation recapture is $____.
Anewly built property, containing space fora store and two offices, can be purchased for P1200,000 A prospective buyer estimates that during the next 10 years he can obtain annual rentals of at least P6oo.000 from the property and that the annual Out-of-pocket cisbursements will not exceed P42.000. he belleves that he should be able to dispose of the property at the end of 10 years at not less than P500.000. Annual taxes and insurance will total 2.8% of the first cost. Assume he has Sutficient eguity capital to purenase the property and that the average return he is obtaining from his capital is 30% Would you recommend the investment? a) Use Rate of retum method b) Use payout or payback method
2. The company is setting aside funds to acquire a property for its new warehouse. The company needs P74,735 to make the down payment. The company deposits P5,000/month in the fund account which pays 1% per month. As the financial manager you have been tasked to determine how long it will take to accumulate enough funds to acquire the property?

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