Suppose that you are attempting to value an income-producing property using the direct capitalization approach. Using data from comparable properties, you have determined the overall capitalization rate to be 7.0%, a reasonable discount rate of 9%, and an exit cap rate of 12%. If the projected first-year net operating income (NOI) for the subject property is $135,500, If the projected second-year net operating income (NOI) for the subject property is $145,500, and the projected final- year total cash flow for the subject property is $1,155,500 what is the indicated value of the subject using direct capitalization? Enter the answer below as an absolute value (a positive number), no dollar sign. Rounding to the nearest whole number (no decimal places) is ok. Your Answer:

Suppose that you are attempting to value an income-producing property using the direct capitalization approach. Using data from comparable properties, you have determined the overall capitalization rate to be 7.0%, a reasonable discount rate of 9%, and an exit cap rate of 12%. If the projected first-year net operating income (NOI) for the subject property is $135,500, If the projected second-year net operating income (NOI) for the subject property is $145,500, and the projected final- year total cash flow for the subject property is $1,155,500 what is the indicated value of the subject using direct capitalization? Enter the answer below as an absolute value (a positive number), no dollar sign. Rounding to the nearest whole number (no decimal places) is ok. Your Answer:

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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For the following two projects, which statement is correct. Year 0 1 2 Playhouse -30 16 23 Fort -80 45 48 O choose Fort when the cost of capital is 4% O choose Fort because its IRR is higher choose Fort when the cost of capital is 6% O choose Playhouse because its IRR is higher
Your firm is considering a number of mutually exclusive choices for a property that you recently acquired. The following are the projected cash flows for one of the projects over its seven-year life. Cash Flows 0 1 2 3 4 5 6 7 (600,000) 100,000 120,000 140,000 160,000 180,000 200,000 220,000 If the appropriate discount rate is 12%, what is the annualized Net Present Value for this option? (Do not round intermediate calculations and enter your answer in dollars with-no decimal places, e.g., 24316.)
An institutional investor is comparing management fees for two competing real estate investment funds. Both funds expect to begin operations and are accepting capital commitments. When the funds begin acquiring properties, capital calls will be made for capital contributions during the investment period. Fund A will charge a fee of 45 BP on capital committed and 60 BP on capital invested after the investment period ends. Fund B will charge a fee of 50 BP on capital committed and 55 BP on capital invested after the investment period ends. Both funds expect to have $504,000,000 in capital commitments when the fund commences operations and both project a five-year cycle for startup and acquisitions. Capital flows are expected as follows: Fund A Contributed Capital Capital Returned Invested Capital Year 1 $ 201,600,000 $ 0 $ 201,600,000 Year 2 302,400,000 0 504,000,000 Year 3 0 504,000,000 Year 4 100,800,000 403,200,000 Year 5 50,400,000 352,800,000 Fund B…
The following table shows the projected free cash flows of an acquisition target. The potential acquirer wants to estimate its maximum acquisition price at an 8 percent discount rate and a terminal value in year 5 based on the perpetual growth equation with a 4 percent perpetual growth rate. Year 1 2 3 4 5 Free cash flow −860 −430 0 236 772 Estimate the target’s maximum acquisition price. Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. Estimate the target’s maximum acquisition price when the discount rate is 7 percent and the perpetual growth rate is 5 percent. Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.
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 Answer is complete but not entirely correct. Total value b. Laputa's equity $ 1 $ 81 21 60 18 10 3 Year 893 224 2 $ 101 31 70 21 13 3 16 35 种味道 $ 116 36 80 24 16 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 12%, its debt yields 8%, and it pays corporate tax at 30% $ 121 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…
Que are in the picture.
Use the information provided to answer the questions.Use the information provided below to calculate the following. Where applicable, use the presentvalue tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. QUESTION) Calculate the Accounting Rate of Return (on average investment) of Project B (expressed to twodecimal places). INFORMATION Zeda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest inone of them. You are given the following projected data:Project A Project BInitial cost R300 000 R300 000Scrap value R40 000 0Depreciation per year R52 000 R60 000Net profitYear 1 R20 000Year 2 R30 000Year 3 R50 000Year 4 R60 000Year 5 R10 000Net cash flowsYear 1 R90 000Year 2 R90 000Year 3 R90 000Year 4 R90 000Year 5 R90 000 Additional informationThe discount rate used by the company is 12%. Transcribed Image Text:Number of Periods 1 2 3 4 5 6 7 8 m 10 11 12 13 14 15 1% 2% 0.9901 0.9804 0.9709 3% 3.9020 3.8077…
An institutional investor is comparing management fees for two competing real estate investment funds. Both funds expect to begin operations and are accepting capital commitments. When the funds begin acquiring properties, capital calls will be made for capital contributions during the investment period. Fund A will charge a fee of 45 BP on capital committed and 60 BP on capital invested after the investment period ends. Fund B will charge a fee of 50 BP on capital committed and 55 BP on capital invested after the investment period ends. Both funds expect to have $506,000,000 in capital commitments when the fund commences operations and both project a five-year cycle for startup and acquisitions. Capital flows are expected as follows: Fund A Year 1 Year 2 Year 3 Year 4 Year 5 Fund B Year 1 Year 2 Year 3 Year 4 Year 5 Contributed Capital $ 202,400,000 303,600,000 Contributed Capital $ 303,600,000 202,400,000 Required A Fund A Fund B Capital Returned $0 0 0 Required B 101,200,000…
Two potential real estate investments are under review by an investment firm. One is a 75,000 square foot office building in Portland, Oregon with a projected pre-tax leveraged IRR of 18.8% and the other is a 54-unit garden apartment building in Scranton, Pennsylvania with a projected pre-tax leveraged IRR of 14.5%. The investment firm should: a. Carefully weigh the projected returns relative to the potential risks of each investment during the due diligence process to determine whether either investment should be chosen b. Choose the Scranton apartment building with the lower expected IRR because it must be a safer investment c. Choose neither investment because both IRRs seem too good to be true in today’s market d.Choose the Portland industrial building with the higher expected IRR because it will definitely appreciate in value more over time
Acme Investors is considering the purchase of the undeveloped Baker Tract of land. It is currently zoned for agricultural use. If purchased, however, Acme must decide how to have the property rezoned for commercial use and then how to develop the site. Based on its market study, Acme has made estimates for the two uses that it deems possible, that is, office or retail. Based on its estimates, the land could be developed as follows: Rentable square feet Rents per square foot Operating expense ratio Average growth in NOI per annum Required return (r) Total construction cost per square foot Office 100,000 $ 42.00 Required: Which would be the highest and best use of this site? Which would be the highest and best use of this site? 40% 3% 13% $118 Retail 80,000 $ 52.50 50% 3% 14% $118
An investor has invested $1,000,000 in a real estate project that will give him an IRR (Internal Rate of Return) of 10%. The NPV of the cash flows of this project, discounted at 10% will be: Select one: a. 100,000 b. 0 c. 900,000 d. Positive e. Both a and d

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