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You have an opportunity to acquire a property from First Capital Bank. The ban obtained the property from a borrower who defaulted on his loan. First Capital property for $314,000. If you buy the property, you believe that you will have to $12,400 on various acquisition-related expenses and (2) an average of $3,900 during the next 12 months for repair costs, and so on, in order to prepare it for s First Capital Bank would like to sell the property as soon as possible, it is willing $294,000 in financing at 4.25 percent interest for 12 months payable monthly (i Your market research indicates that after you repair the property, it may sell for $373,000 at the end of one year. Furthermore, you will probably have to pay ab fees and selling expenses in order to sell the property at that time.

You have an opportunity to acquire a property from First Capital Bank. The ban obtained the property from a borrower who defaulted on his loan. First Capital property for $314,000. If you buy the property, you believe that you will have to $12,400 on various acquisition-related expenses and (2) an average of $3,900 during the next 12 months for repair costs, and so on, in order to prepare it for s First Capital Bank would like to sell the property as soon as possible, it is willing $294,000 in financing at 4.25 percent interest for 12 months payable monthly (i Your market research indicates that after you repair the property, it may sell for $373,000 at the end of one year. Furthermore, you will probably have to pay ab fees and selling expenses in order to sell the property at that time.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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You have an opportunity to acquire a property from First Capital Bank. The bank recently obtained the property from a borrower who defaulted on his loan. First Capital is offering the property for $314,000. If you buy the property, you believe that you will have to spend (1) $12,400 on various acquisition-related expenses and (2) an average of $3,900 per month during the next 12 months for repair costs, and so on, in order to prepare it for sale. Because First Capital Bank would like to sell the property as soon as possible, it is willing to provide $294,000 in financing at 4.25 percent interest for 12 months payable monthly (interest only). Your market research indicates that after you repair the property, it may sell for about $373,000 at the end of one year. Furthermore, you will probably have to pay about $4,900 in fees and selling expenses in order to sell the property at that time. Required: a. If you wanted to earn a 20 percent return compounded monthly, do you believe that this would be a good investment? b. What would you need to sell the property for in order to achieve the 20 percent return? (Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.) a. Is this a good investment? b. Sale price
Transcribed Image Text:You have an opportunity to acquire a property from First Capital Bank. The bank recently obtained the property from a borrower who defaulted on his loan. First Capital is offering the property for $314,000. If you buy the property, you believe that you will have to spend (1) $12,400 on various acquisition-related expenses and (2) an average of $3,900 per month during the next 12 months for repair costs, and so on, in order to prepare it for sale. Because First Capital Bank would like to sell the property as soon as possible, it is willing to provide $294,000 in financing at 4.25 percent interest for 12 months payable monthly (interest only). Your market research indicates that after you repair the property, it may sell for about $373,000 at the end of one year. Furthermore, you will probably have to pay about $4,900 in fees and selling expenses in order to sell the property at that time. Required: a. If you wanted to earn a 20 percent return compounded monthly, do you believe that this would be a good investment? b. What would you need to sell the property for in order to achieve the 20 percent return? (Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.) a. Is this a good investment? b. Sale price
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