Please answer practice question 6 Question 6The following 5 questions are based on this situation: Suppose you are considering theacquisition of a hotel that is currently trading at $ 67 million. The current return on suchinvestments on the market is estimated at 10%. The investor's required rate of return is of11%. The asset's (annual) NOI for the next 5 years (i.e. the current lease term) is $ 6,000,000.At the end of the current lease, you expect the NOI to increase to $ 6,500,000 for theforeseeable future. You anticipate selling the property five years from today. The building toland value ratio is 3:1 and the depreciable life of the property is 39 years. You contacted yourbanker who is willing to give you a LTV of 80%. The mortgage loan details are: 7.5% 30-yearmonthly amortizing loan. The tax rates are as follows: 22% income tax, 25% depreciationrecapture tax, 20% capital gains tax. Consider straight-line depreciation. The going-in Caprate is 7%. 5 years later, 50bps additional risk premium should be applied to estimate thegoing-out cap rate. The cost of sales( and purchase) is 3%. What is the taxable income in year4?O a. $832,534O b. $ 4,093,195O. $ 183,158O d. $2,120,996

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Answered: The following 5 questions are based on…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 1P

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Consider a 5-year lease for a $400,000 bottling machine, with a residual market value of $120,000 at the end of 5 years. If the risk-free interest rate is 5.4% APR with monthly compounding, compute the monthly lease payment in a perfect market for the following leases: a. A fair market value lease. b. A $1.00 out lease. c. A fixed price lease with an $71,000 final price. a. A fair market value lease. The present value of the lease payments is $ A fair market value lease would be $ (Round to the nearest dollar.) (Round to the nearest dollar.) b. A $1.00 out lease. A $1.00 out lease would be $ (Round to the nearest dollar.) c. A fixed price lease with an $71,000 final price. The present value of the lease payments is $ (Round to the nearest dollar.) A fixed price lease with an $71,000 final price would be $. (Round to the nearest dollar.)
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a) A client wants to purchase a shop as part of an investment portfolio. The shop was let on a 20-year FRI lease, 8 years ago at the rent of €120,000 per annum and is subject to 5-yearly, upwards-only rent reviews. The investor's target (equated yield) is 8%. The probable average future growth has been assessed to be 1.5% per annum compound. Estimate the freehold value of the property assuming an ARY of 5%. You are asked to use the DCF approach.
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