Office Mega is used as a comparable for the subject property. At the time of appraisal, Mega'sleasing contract has eight years remaining at a rental rate that was $0.5 below the market rate withan area of 17,980 square feet. The market rental rate is expected to grow by $0.25 annually. Thenwhat should be the adjustment amount for Mega with a discount rate of 8.5%?$27,681.00$128,635.71$178,457-$27.681.00

As it is given that the lease rate is always $0.5 lesser than market rate and that the market rate…

Answered: Office Mega is used as a comparable for…

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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A store has 5 years remaining on its lease in a mall. Rent is $2,100 per month, 60 payments remain, and the next payment is due in 1 month. The mall's owner plans to sell the property in a year and wants rent at that time to be high so that the property will appear more valuable. Therefore, the store has been offered a "great deal" (owner's words) on a new 5-year lease. The new lease calls for no rent for 9 months, then payments of $2,500 per month for the next 51 months. The lease cannot be broken, and the store's WACC is 12% (or 1% per month). a. Should the new lease be accepted? (Hint: Be sure to use 1% per month.) -Select- ✓ b. If the store owner decided to bargain with the mall's owner over the new lease payment, what new lease payment would make the store owner indifferent between the new and old leases? (Hint: Find FV of the old lease's original cost at t = 9; then treat this as the PV of a 51-period annuity whose payments represent the rent during months 10 to 60.) Do not round…
Apolonia Place is an office building that has recently been put up for sale. It is rented by one tenantwho has ten years remaining on their lease. The rent for years 1-3 has been fixed at ¢300,000 perannum, the rent for years 4-6 is fixed at ¢420,000 per annum and the rent for years 7-10 has beenfixed at ¢510,000 per annum. The rent is payable annually and in arrears. When the lease ends, itis forecast that the property will sell for ¢2 million. The property is currently being advertised for¢2.7 million and the landlord has already paid an advertisement cost of ¢500,000. The risk oninvestment of this kind is currently 12%.(a) Calculate the payback of the investment and comment on your results.(b) Calculate the NPV of the investment and comment on your results.(c) Calculate the IRR of the investment and comment on your results.(d) Your client, Mr. Yeboah, has approached you that he wants to purchase Apolonia Place andanticipates that he can use 5 years to recoup his investment. Prior to…
A firm needs some machinery which it can lease from the manufacturer for a five-year period by making lease payments of $8,000 at the end of each month. If the interest rate for the firm is 8% p.a., with monthly compounding, the present value of the lease payments is closest to: O $394,547. $380,289. $383,300. O $470,547.
A contractor’s price for a new building was $96,000. You decide to buy the building, making a payment of $12,000 down and financing the balance by making equal payments at the end of every 6 months for 12 years. Interest is 7.3% compounded semi-annually. B) For the first payment period, how much interest is paid, how much of the principal is repaid, and what is the loan balance at the end of first installment? how much interest is paid how much of the principal is repaid what is the loan balance? C) For the fifteen payment period, how much interest is paid, how much of the principal is repaid, and what is the loan balance at the end of first installment? how much interest is paid how much of the principal is repaid what is the loan balance?
Kim Inc. must install a new air-conditioning unit in its main plant. Kim must install one or the other of the units; otherwise, the highly profitable plant would have to shut down. Two units are available, HCC and LCC (for high and low capital costs, respectively). HCC has a high capital cost but relatively low operating costs, while LCC has a low capital cost but higher operating costs because it uses more electricity. The costs of the units are shown here. Kim's WACC is 6%. HCC LCC 0 -Select- 1 -$50,000 -$50,000 -$610,000 -$50,000 -$90,000 -$175,000 -$175,000 -$175,000 2 -Select- 3 -Select- ✓ 4 -$50,000 -$175,000 a. Which unit would you recommend? I. Since all of the cash flows are negative, the IRR's will be negative and we do not accept any project that has a negative IRR. II. Since all of the cash flows are negative, the NPV's cannot be calculated and an alternative method must be employed. III. Since all of the cash flows are negative, the NPV's will be negative and we do not…
A property owner is evaluating the following alternatives for leasing space in his office building for the next five years: Gross lease. Rent will be $34 per square foot each year with the lessor responsible for payment of all operating expenses. Expenses are estimated to be $9 during the first year and increase by $1 per year thereafter. Calculate the effective rent to the owner (after expenses) for the lease using a 11 percent discount rate. (Click to select) (Click to select) $29.01 $18.57 $23.21 $22.05
Bird Wing Bedding can lease an asset for 4 years with payments of $22,000 due at the beginning of the year. The firm can borrow at a 6% rate and pays a 25% federal-plus-state tax rate. The lease qualifies as a tax-oriented lease. What is the cost of leasing?
I'm just having trouble with the first entry. See photos please.
One of the departments at Yolo Industries has entered into a 9 year lease for a piece of equipment. The annual payment under the lease will be $3,600, with payments being made at the beginning of each year. If the discount rate is 10%, the present value of the lease payments is closest to (Ignore income taxes.): Click here to view Exhibit 14B-1 and Exhibit 148-2, to determine the appropriate discount factor(s) using the tables provided. (Round your intermediate calculations to 3 decimal places.) Multiple Choice $22,806 $10,07Y $22,105 $32,400
Assume an apartment has a floor area of 3,000 SF. The existing rent per month is $3,000. The market level rent is $15,000 per month. Assume that the tenant is willing to enter into a voluntary vacate agreement to be bought out of his lease and that you are now negotiating a buy out price. The apartment requires an additional $200,000 in renovation to get it up to market standards. If a prevailing cap rate for this apartment is 4.0%, at what buy out price is the incremental value created by the landlord for this unit after renovations equal to zero? O $3,40,000 O $2,350,000 O $1,000,000 O $3,100,000
Cost of Leasing Bird Wing Bedding can lease an asset for 4 years with payments of $17,000 due at the beginning of the year. The firm can borrow at a 6% rate and pays a 25% federal-plus-state tax rate. The lease qualifies as a tax-oriented lease. What is the cost of leasing? Do not round intermediate calculations. Round your answer to the nearest dollar. $
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