Mr. Sam Golff desires to invest a portion of his assets in rental property. He has narrowed his choices down to two apartment complexes, Palmer Heights and Crenshaw Village. After conferring with the present owners, Mr. Golff has developed the following estimates of the cash flows for these properties. Palmer Heights Yearly Aftertax Cash Inflow (in thousands) Probability $60 0.1 65 0.2 80 0.4 95 0.2 100 0.1 Crenshaw Village Yearly Aftertax Cash Inflow (in thousands) Probability $65 0.2 70 0.3 80 0.4 90 0.1 a. Find the expected cash flow from each apartment complex. (Enter your answers in thousands (e.g, $10,000 should be enter as "10").) b. What is the coefficient of variation for each apartment complex? (Do not round intermediate calculations. Round your answers to 3 decimal places.) c. Which apartment complex has more risk? multiple choice Palmer Heights Crenshaw Village

Mr. Sam Golff desires to invest a portion of his assets in rental property. He has narrowed his choices down to two apartment complexes, Palmer Heights and Crenshaw Village. After conferring with the present owners, Mr. Golff has developed the following estimates of the cash flows for these properties. Palmer Heights Yearly Aftertax Cash Inflow (in thousands) Probability $60 0.1 65 0.2 80 0.4 95 0.2 100 0.1 Crenshaw Village Yearly Aftertax Cash Inflow (in thousands) Probability $65 0.2 70 0.3 80 0.4 90 0.1 a. Find the expected cash flow from each apartment complex. (Enter your answers in thousands (e.g, $10,000 should be enter as "10").) b. What is the coefficient of variation for each apartment complex? (Do not round intermediate calculations. Round your answers to 3 decimal places.) c. Which apartment complex has more risk? multiple choice Palmer Heights Crenshaw Village

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter16: Real Estate And High-risk Investments

Section: Chapter Questions

Problem 1FPC

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Mrs. Dionne Jackson desires to invest a portion of her assets in rental property. She has narrowed her choices down to two apartment complexes, Palmer Heights and Crenshaw Village. After conferring with the present owners, Mrs. Jackson has developed the following estimates of the cash flows for these properties. Palmer Heights Yearly Aftertax Cash Inflow (in thousands) Probability $ 60 0.1 65 0.2 80 0.4 95 0.2 100 0.1 Crenshaw Village Yearly Aftertax Cash Inflow (in thousands) Probability $ 65 0.2 70 0.3 80 0.4 90 0.1 Find the expected cash flow from each apartment complex. Expected cash flow (in thousands) palmer heights crenshaw village
3) Coefficient of variation and investment decision Mr. Sam Golff desires to invest a portion of his assets in rental property. He has narrowed his choices down to two apartment complexes, Palmer Heights and Crenshaw Village. After conferring with the present owners, Mr. Golff has developed the following estimates of the cash flows for these properties: Palmer Heights Crenshaw Village Yearly Aftertax Cash Inflow (in thousands) Probability Yearly Aftertax Cash Inflow (in thousands) Probability $70.................. .2 $75..................... .2 75.................. .2 80..................... .3 90.................. .2 90..................... .4 105.................. .2 100..................... .1 110.................. .2 a. Find the expected cash flow from each apartment complex. b. What is the coefficient of variation for each apartment complex? c.…
Mr. John Backster, a retired executive, desires to invest a portion of his assets in rental property. He has narrowed his choices to two apartment complexes, Windy Acres and Hillcrest Apartments. The anticipated annual cash inflows from each are as follows: Windy Acres Hillcrest Apartments Yearly Aftertax Cash Inflow Probability Yearly Aftertax Cash Inflow Probability $30,000 0.2 $35,000 0.4 35,000 0.2 40,000 0.2 50,000 0.2 50,000 0.1 65,000 0.2 60,000 0.3 70,000 0.2 a. Find the expected value of the cash flow for each apartment complex. (Enter the answers in thousands.) Expected cash flow Windy Acres $ Hillcrest Apartments $ b. What is the coefficient of variation for each apartment complex? (Do not round intermediate calculations. Round the final answers to 4 decimal places.) Coefficient of variation Windy Acres Hillcrest Apartments c. Which apartment complex has more risk?…
Mr. John Backster, a retired executive, desires to invest a portion of his assets in rental property. He has narrowed his choices to two apartment complexes, Windy Acres and Hillcrest Apartments. The anticipated annual cash inflows from each are as follows: Windy Acres Yearly Aftertax Cash Inflow Hillcrest Apartments Yearly Aftertax Probability Cash Inflow Probability 70,000 0.2 75,000 0.2 75,000 0.2 80,000 0.3 90,000 0.2 90,000 105,000 110,000 0.2 0.2 100,000 0.4 0.1 Mr. Backster is likely to hold the apartment complex of his choice for about 25 years and will use this period for decision-making purposes. Either apartment can be purchased for $200,000. Mr. Backster uses a risk-adjusted discount rate approach when evaluating investments. His scale is related to the coefficient of variation (for other types of investments, he also considers other measures). Coefficient of Variation 0-0.35 Discount Rate 7% 0.35-0.40 10 (cost of capital) 0.40-0.50 14 Over 0.50 not considered • Common the…
Mr. John Backster, a retired executive, desires to invest a portion of his assets in rental property. He has narrowed his choices to two apartment complexes, Windy Acres and Hillcrest Apartments. The anticipated annual cash inflows from each are as follows: Windy Acres Yearly Aftertax Cash Inflow 10,000 Probability 0.1 15,000 30,000 45,000 50,000 0.2 0.4 0.2 0.1 Hillcrest Apartments Yearly Aftertax Cash Inflow Probability 15,000 20,000 30,000 60,000 0.2 0.3 0.4 0.1 Mr. Backster is likely to hold the apartment complex of his choice for about 25 years and will use this period for decision-making purposes. Either apartment can be purchased for $200,000, Mr. Backster uses a risk adjusted discount rate approach when evaluating investments. His scale is related to the coefficient of variation (for other types of investments, he also considers other measures). Coefficient of Variation 0-0.35 0.35-0.40 0.40-0.58 Over 8.58 Discount Rate 5% 9 13 not considered (cost of capital) a. Compute the…
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Mr. John Backster, a retired executive, desires to invest a portion of his assets in rental property. He has narrowed his choices to two apartment complexes, Windy Acres and Hillcrest Apartments. The anticipated annual cash inflows from each are as follows: Windy Acres Yearly Aftertax Cash Inflow 30,000 35,000 50,000 65,000 70,000 Coefficient of Variation 0-0.35 0.35-0.40 0.40-0.50 Over 0.50 Windy Acres Hillcrest Apartments Mr. Backster is likely to hold the apartment complex of his choice for about 25 years and will use this period for decision-making purposes. Either apartment can be purchased for $175,000. Mr. Backster uses a risk-adjusted discount rate approach when evaluating investments. His scale is related to the coefficient of variation (for other types of investments, he also considers other measures). Hillcrest Windy Acres Probability 0.2 O Both 0.2 0.2 0.2 0.2 None Discount Rate 7% O Both O None Hillcrest Apartments 12 15 not considered Yearly Aftertax Cash Inflow a.…
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The following questions are based on the series of the following cash flows. You plan to sell the property in year 5. The buyer anticipates buying the property for $2,500,000 and selling the property for $3,000,000. The NOI for each year is noted. Please put your answer in percentage with two decimal places; for instance, put 7.63 for 7.63%. Please put dollar amounts with two decimal places as well. Please enter a positive value. All questions should be completed in excel. Rounding will result in an incorrect answer. NOI Property Transactions Year O (2,500,000) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 200,000 212,000 224,720 238,203 252,495 267,645 Your equity partner wants to know how a change in the exit cap rate will affect the IRR of the property when you sell in year 5. What is the IRR with exit cap rates at 10%?
Jacob has an opportunity to invest in a new retail development in his building. The initial investment is $50,000 and the expected cash flows are as follows: Year 1: $2,500; Year 2: $5,000; Year 3: $5,000; Year 4: $7,500; Year 5: $10,000; Year 6: $10,000; Year 7: $15,000 and Year 8: $15,000. What is Jacob's IRR on this investment? Select one: Select one: O 7.67% O 6.34% O 5.56% O 4.99%
jacob has an opportunity to invest in a new retail development in his building. The initial investment is $53,000 and the expected annual cashflows thereafter are {$2,400; $4,000; $4,000; $7,500; $11,000; $11,000; $14,000; $14,000}. What is Jacob's IRR on this investment? (Allow two decimals in the percentage but do not enter the % sign.)