An apartment property that will be held for 10 years has the following forecasted cash flows beforetaxes:1234$52,7602,7202,6862,6592,636$13,387$23,199$88,400EOP$90,5006789102,581It is expected that the end of year 10 sales proceeds before taxes will be $39,697. How much initialinvestment can an equity investor pay for the equity portion if the investor requires a 15-percent,before-tax return?$2,6192,6042,5942,587

The maximum value of the initial investment likely to be paid by an investor will be the present…

Answered: An apartment property that will be held…

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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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.
If $10,000 is invested in a certain business at the start of the year, the investor will receive $3,000 at the end of each of the next four years. What is the present value of this business opportunity if the interest rate is 4% per year? A. $1,068 B. $890 C. $445 D. $1424
You have been depositing money into an account yearly based on the following investment amounts, rates and times, what is the value of that investment account at the end of that period? (Click here to see present value and future value tables) Amounts ofInvestment Rate Times Value at the Endof the Period $9,000 20% 16 years $fill in the blank 1 $13,000 15% 11 years $fill in the blank 2 $16,000 12% 6 years $fill in the blank 3 $35,000 10% 4 years $fill in the blank 4
If you invest $8,800, what is your rate of return if you will receive the following cash flows at the end of these years: Yr. 1 $2,000; Yr. 2 $2,100; Yr. 3 $2,200; Yr. 4 $2,300; Yr. 5 $3,700?
If you invest $2,000 per year for 9 years and earn a 5% return on your investment during that period, how much will you have accumulated by the end of the nine-year period? (a) $2,000 (b) $11,970 (c) $18,000 (d) $22,054 (e) $30,000
An investment of $185,575 is expected to generate returns of $65,000 per year for each of the next 4 years. Following is a table for the present value of $1 at compound interest: Year 1 2 3 4 12% 0.943 0.909 0.893 0.870 0.890 0.826 0.797 0.756 0.840 0.751 0.712 0.658 0.792 0.683 0.636 0.572 0.747 0.621 0.567 0.497 Following is a table for the present value of an annuity of $1 at compound interest: Year 6% 10% 12% 15% 1 0.943 0.909 0.893 0.870 2 1.833 1.736 1.690 1.626 3 2.673 2.487 2.402 2.283 4 3.465 3.170 3.037 2.855 4.212 3.791 3.605 3.353 5 5 6% 10% % 15% What is the investment's internal rate of return?
Consider the following cash flows. The interest rate is 10%. What is the total wealth after 2 years if you sell the rights to the remaining cash flows? Year 0 1 2 3 4 Cash flow 150 120 100 200
d. How much do you have to invest today and every six months thereafter for the next 10 years if you want to accumulate a total of $400,000, 10 years from today in an investment paying 10% semiannually? Do not answer in image format
Consider the following data showing the cash flows per year from a real estate property: Year: 1 2 3 4 5 Cash Flow: $21,000 $22,000 $23,000 $24,000 $25,000 After the 5th year, cash flows are expected to rise at a constant rate of 2.5% per year for the many years in the future. Your cost of money (interest paid on the loan) is 5.5% per year. A. Calculate the appraisal value of the house. B. Define and calculate the cap rate. Explain what it means. (Answer with respect to Excel for both)
What is the present value of a savings account that is expected to pay $1,250 of cash inflow at the end of year 1, $0 cash inflow at the end of year 2 and $1,050 cash inflow at the end of 3rd year given the rate of return 10% in the first and second year and 12% in the third year? Please Show the work
5-8 present and future values of a cash flow stream.An investment will pay $100 at the end of each of the next 3years $200 at the end of year 6. If other investment of equal risk earn 5% annually what is it's present value? it's future value
Suppose that you have the opportunity to receive $24,000 per year for the next 6 years. Over this time period, the APR is 7% per year. Interest is compounded on a monthly basis. How much are you willing to pay for this investment today? Round your answer to the nearest dollar. a. PVA = $113,739 b. PVA = $118,309 c. PVA = $117,309 d. PVA = $118,903

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