According to the income approach, this transaction would be recorded as aA. $60,000 increase in domestic value added by the brokerage service.B. $60,000 increase in income received by the real estate broker.C. $60,000 increase in residential investment.D. $1,060,000 increase in residential investment.E. $1,060,000 increase in domestic value added, for the value of the house. Colonel Hogwash purchases a Civil War-era mansion for $1,000,000. The broker's fee is 6%, which the colonel also pays, for a total expenditure of $1,060,000.

The transactions get recorded as income approach, expenditure approach and product approach. We will…

Answered: According to the income approach, this…

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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Land costing $138,463 was sold for $175,514 cash. The gain on the sale was reported on the income statement as other income. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?
Land costing $41,526 was sold for $79,878 cash. The gain on the sale was reported on the income statement as other income. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?
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You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its future investments in new plant and working capital: Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation Pretax profit Tax at 30% Investment 1 $ 78 38 40 12 14 Year a. Total value b. Laputa's equity 2 $ 98 48 50 15 17 3 $ 113 53 60 18 20 4 $ 118 58 60 18 22 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 40% by equity and 60% by debt. Its cost of equity is 13%, its debt yields 9%, and it pays corporate tax at 30%. a. Estimate the company's total value. Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. b. What is the value of Laputa's equity? Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount.
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You have been asked to develop a pro forma statement of cash flow for West Office Plaza. The information given to you is listed below. Property Information: WEST OFFICE PLAZA Rentable Area Age Number of Stories Number of Tenants Financial Information: Base Rent Average Other Income/Parking/Storage Expenses Recoverable from Tenants Current Vacancy Expenses: 334,000 square feet 8 years Management/Administration/Security/Ownership Property Taxes Insurance General Operations/Leasing Expense/Marketing Utilities Janitorial/Cleaning Business Taxes Other: Recurring CAPEX/Improvement Allowance Revenue Add: 15 40 Less: Less: Operating expenses Required: a. Develop a pro forma statement of cash flow for a base year showing net operating income (NOI) for West Office Plaza. WEST OFFICE PLAZA Total operating expenses Cap expenses/Improvement allowance $20 per square feet $ 3.20 per square feet $ 4.20 per square feet 5% $ 698,400 $ 683,500 $ 433,400 $ 675,500 $1,167,600 $ 497,500 $ 118,500 $ 708,500
Land costing $40,631 was sold for $79,720 cash. The gain on the sale was reported on the income statement as other income. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?
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Here are data on two firms: Equity ($ million) ROC (%) Cost of Capital (%) Debt ($ million) Аспе 140 60 16 10 Арех 440 160 14 11 a-1. Calculate the economic value added? (Do not round intermediate calculations. Enter your answers in millions) Acme Aрех Economic value added milion milion
You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its future investments in new plant and working capital: Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation Pretax profit Tax at 30% Investment 1 $ 73 33 40 12 19 a. Total value b. Laputa's equity Year 2 $93 43 50 15 22 3 $ 108 48 60 18 25 4 $ 113 53 60 18 27 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 60% by equity and 40% by debt. Its cost of equity is 18%, its debt yields 9%, and it pays corporate tax at 30%. a. Estimate the company's total value. Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. b. What is the value of Laputa's equity? Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount.
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