Question 3Consider the following projected cash flows (including reversion) for Property A and PropertyB for the following 10 years. Assume that operating cash flows (excluding reversion) = NOI,there are no capital expenditures.Annual net cash flow projections for two properties ($ millions)12345678910A $1.0000 $1.0050 $1.0100 $1.0151 $1.0202 $1.0253 $1.0304 $1.0355 $1.0407 $12.7252B $1.0000 $1.0200 $1.0404 $1.0612 $1.0824 $1.1041 $1.1262 $1.1487 $1.1717 $14.7395a. What is the annual growth rate in operating cash flows for each building during the firstnine years?b. If both properties sell at cap rates (initial and terminal cash yields) of 9%, what is theexpected annual return (IRR) on a 10-year investment in each property?

Constant annual growth rate for project A. Annual growth rate =next year cash flowcurrent year cash…

a. What is the annual growth rate in operating cash flows for each building during the first ine years? b. If both properties sell at cap rates (initial and terminal cash yields) of 9%, what is the xpected annual return (IRR) on a 10-year investment in each property?

a. What is the annual growth rate in operating cash flows for each building during the first ine years? b. If both properties sell at cap rates (initial and terminal cash yields) of 9%, what is the xpected annual return (IRR) on a 10-year investment in each property?

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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Cash Flow Statement Analysis

A company's cash flow is the movement of its cash inflows and cash outflows. A cash flow statement is prepared to determine changes in an organization's cash position. A cash flow statement shows how much money was generated and spent on the business during the fiscal year. The cash flow analysis is a method of analyzing an organization's investing, financing, and operating activities. A cash flow statement reveals an organization's liquidity and solvency, as well as its ability to change cash flows in the future. It eliminates the other effects of accounting methods by improving the comparability of different organizations' operational performance.

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