If you require a 10% stabilized yield on cost, stabilizedvacancy is expected to be 5%, gross square footage is100,000 sf, project development costs will be $18 MM,and net rents (rents after all expenses are paid) are$65.00 psf per year, what can you pay for the land?O $15 MMO $43.75 MM$61.75 MMThe high development costs make purchasing thebuilding unfeasibleThere is not enough information to solve this problemO None of these are correct What is the gross development profit margin (rounded tothe nearest percent) for a going in cap rate of 10 and aselling cap rate of 7?O 25%33%O 40%O 20%30%70%None of these are correct

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Answered: If you require a 10% stabilized yield…

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 must decide firm which of the proposed projects should be accepted for the upcoming year since only $6 million is available. Which projects should be accepted? Project Cost (millions) NPV(millions) A 3.25 0.80 В 1.75 0.52 C 4.5 0.69 D 3.75 0.95 E 1.25 0.25 F 0.50 0.25
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You are considering a new product launch. The project will cost $1,750,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 220 units per year; price per unit will be $20,000, variable cost per unit will be $13,000, and fixed costs will be $500,000 per year. The required return on the project is 15 percent, and the relevant tax rate is 22 percent. a-1.The unit sales, variable cost, and fixed cost projections given above are probably accurate to within ±10 percent. What are the upper and lower bounds for these projections? What is the base-case NPV? What are the best-case and worst-case scenarios? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.)a-2.What is the base-case NPV? What are the best-case and worst-case scenarios? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g.,…
The investor-developer would not be comfortable with a 7.8 percent return on cost because the margin for error is too risky. If construction costs are higher or rents are lower than anticipated, the project may not be feasible. The asking price of the project is $12,700,000 and the construction cost per unit is $82,200. The current rent to justify the land acqusition is $2.2 per square foot. The weighted average is 900 square feet per unit. Average vacancy and Operating expenses are 5% and 35% of Gross Revenue respectively. Use the following data to rework the calculations in Concept Box 16.2 in order to assess the feasibility of the project: Required: a. Based on the fact that the project appears to have 9,360 square feet of surface area in excess of zoning requirements, the developer could make an argument to the planning department for an additional 10 units, 250 units in total, or 25 units per acre. What is the percentage return on total cost under the revised proposal? Is the…
You are considering the following project. What is the NPV of the project? WACC of the project: 0.10 Revenue growth rate: 0.05 Tax rate: 0.40 Revenue for year 1: 13,000 Fixed costs for year 1: 3,000 variable costs (% of revenue): 0.30 project life: 3 years Economic life of equipment: 3 years Cost of equipment: 20,000 Salvage value of equipment: 4,000 Initial investment in net working capital: 2,000
Randall's Ales & Porters S.A., is considering expanding into Costa Rica. As an incentive, Costa Rica agrees not to charge the company any taxes. The project has the following estimated data: price = $94 per unit variable costs = $50.76 per unit fixed costs = $7,600 required return = 16 percent initial investment = $11,000 life = three years depreciable life = three years, straight-line. Required: (a)What is the accounting break-even quantity? (Do not round your intermediate calculations.) (Click to select) ♥ (b)What is the cash break-even quantity? (Do not round your intermediate calculations.) (Click to select) ♥ (c) What is the financial break-even quantity? (Do not round your intermediate calculations.) (Click to select) ♥
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Using a required rate of return equal to 10 percent, compute the modified internal rate of return (MIRR) for a project that costs $80,000 and is expected to generate $33,000, $66,000, and -$10,950, respectively, during the next three years. Should the project be purchased? Do not round intermediate calculations. Round your answer to two decimal places. The project -Select- (should, should not) be purchase because the MIRR, that is %, is -Select- (greater than, lower than, equal to) the required rate of return.
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Most you can pay negative NPV? 22. You are getting ready to start a new project that will incur some cleanup and shutdown costs when it is completed. The project costs $5.4 million up front and is expected to generate $1.1 million per year for 10 years and then have some shutdown costs in year 11. Use the MIRR approach to find the maximum shutdown costs you could incur and still meet your cost of capital of 15% on this project. Cald in South Africa
es You are considering a new product launch. The project will cost $2,225,000, have a four- year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 280 units per year; price per unit will be $19,700, variable cost per unit will be $13,250, and fixed costs will be $670,000 per year. The required return on the project is 12 percent, and the relevant tax rate is 21 percent. a. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within ±10 percent. What are the upper and lower bounds for these projections? What is the base-case NPV? What are the best-case and worst-case scenarios? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your NPV answers to 2 decimal places, e.g., 32.16. Round your other answers to the nearest whole number, e.g. 32.) Scenario Unit Sales Variable Cost Fixed Costs NPV Base 280 $ 13,250 $ 670,000…

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