An investor is considering buying an apartment complex for $2,000,000 that has a projected year one NOI of $140,000 and the NOI is expected to increase three percent annually. The investor intends to hold the property five years, sell it for a price calculated by capitalizing the sixth year NOI at seven percent (round the sale price to the nearest $1,000), and incur a cost of sale of four percent of the projected sale price. The tax assessor shows the improvements to be 80 percent of the total value. The investor's marginal tax rate is 37 percent, capital gains rate is 20 percent, and cost recovery recapture rate is 25 percent. What is the "Without Financing/After Tax" Internal Rate of Return (rounded to nearest whole percent? 7 percent 8 percent 9 percent 10 percent

An investor is considering buying an apartment complex for $2,000,000 that has a projected year one NOI of $140,000 and the NOI is expected to increase three percent annually. The investor intends to hold the property five years, sell it for a price calculated by capitalizing the sixth year NOI at seven percent (round the sale price to the nearest $1,000), and incur a cost of sale of four percent of the projected sale price. The tax assessor shows the improvements to be 80 percent of the total value. The investor's marginal tax rate is 37 percent, capital gains rate is 20 percent, and cost recovery recapture rate is 25 percent. What is the "Without Financing/After Tax" Internal Rate of Return (rounded to nearest whole percent? 7 percent 8 percent 9 percent 10 percent

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

See similar textbooks

Similar questions

An apartment will generate $8,000 a year for 5 years, after which you expect to sell the property for $100,000. What is the maximum you should pay for the property if your cost of money is 10% ?
An investor is purchasing an industrial building. He needs to replace the roof today at a cost of $50.000. The economic life of the roof is 20 years. Inflation is 3.0%. He has an investment account that yields 6.0%. How much must he put aside monthly to cover the future cost of the roof?
Assume you win a lottery, and you are offered the following stream of payments by the lottery commission: $25,000 today, $32,000 one year from now, another $32,000 two years from now, and a final payment of $55,000 three years from now. You accept the offer. If you invest all of these proceeds at 6% compounded annually and extract nothing from the investment, how much will you have at the end of the fourth year? Excel Formula Please
A local entreprenuer asks you to invest $10,000 in a business venture. Based on your estimate, you would receive nothing for three years at the end of the four you would receive $4900, and at the end of year five you would receive $14500. If you estimates are correct, what would be the IRR on this investmenet?
If you invest $10,000 per period for the following number of periods, how much would you have in each of the following instances? Use Appendix C for an approximate answer, but calculate your final answer using the formula and financial calculator methods. In 50 years at 8 percent? (Do not round intermediate calculations. Round your final answer to 2 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?
A real estate investor is considering the purchase of an apartment building that currently provides income of $30,000 and is expected to grow in income by 3% for the next 4 years. You would receive income from today, year 0, through year 4. At the end of year 4, they expect to sell the property for $800,000. The investor has a discount rate of 6%. How much should an investor be willing to pay for this property? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure.
I purchased a house and intend to hold the property indefinitely. I plan to rent the house to generate rent income. The first year’s rent is $15,000, and will grow it at the rate of 10% for 3 years after that. After the initial 4 years, the growth rate in the rent will stabilize at 5%. The maintenance will cost $5,000 a year. The appropriate discount rate is 20%. a. What is the present value of rent income? b. What is the present value of the house? c. What is the present value of maintenance costs?
You are considering a 10 year investment plan in which your target is $150,000. There are two options available for you: Option 1: Putting exactly an equal amount of money into an investment fund at the end of each year for 10 years with the rate of return of 8%, annually compounding. Option 2: Putting your initial investment of $50,000 in an asset that will pay you 9% rate of return, compounding quarterly for the first 6 years. The rate of return, compounding annually for the last 4 years (the period from year 7 to the end of year 10) has not been defined yet. Required: Compute the effective annual interest rate (EAR) in the first 6 years in Option 2? Compute the annually compounding rate of return you should target for your asset in the following 4 years to get $150, 000 at the end of year ten in Option 2?
An individual decides to invest in one of two projects, A and B, which both require the same initial outlay of $10 000. Project A yields $11 500 in 3 years’ time whereas Project B yields, $12 100 in 4 years’ time. Calculate the internal rate of return for each project.
Kermit is considering purchasing a new computer system. The purchase price is $131,870. Kermit will borrow one-fourth of the purchase price from a bank at 10 percent per year compounded annually. The loan is to be repaid using equal annual payments over a 3-year period. The computer system is expected to last 5 years and has a salvage value of $7,452 at that time. Over the 5-year period, Kermit expects to pay a technician $20,000 per year to maintain the system but will save $78,952 per year through increased efficiencies. Kermit uses a MARR of 12 percent to evaluate investments. What is the net present worth for this new computer system? Enter your answer in this format: 12345
Yang is considering buying an asset that, starting 5 years from now, will pay $10,000 per year forever. Assume that the required return is 7.25%. What is the most Yang should pay for this asset?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS