You purchased land 3 years ago for $50,000 and believe its market value is now $60,000. You are considering building a hotel on this land instead of selling it. To build the hotel, it will initially cost you $75,000, an expense that you plan to depreciate straight line over the next three years. Wells Fargo offered you a loan for $60,000 at an 8% interest rate to be repaid over the next 4 years. You anticipate that the hotel will earn revenues of $140,000 each year, while expenses will be a mere $30,000 each year. The initial working capital requirement will be $7,000 which will be recovered in the last year. The tax rate is 35%. Your estimated cost of capital is 11%. What is the net present value of this project? OA $63,993 OB.$59,226 OC. $30,495 OD. $10,729
You purchased land 3 years ago for $50,000 and believe its market value is now $60,000. You are considering building a hotel on this land instead of selling it. To build the hotel, it will initially cost you $75,000, an expense that you plan to depreciate straight line over the next three years. Wells Fargo offered you a loan for $60,000 at an 8% interest rate to be repaid over the next 4 years. You anticipate that the hotel will earn revenues of $140,000 each year, while expenses will be a mere $30,000 each year. The initial working capital requirement will be $7,000 which will be recovered in the last year. The tax rate is 35%. Your estimated cost of capital is 11%. What is the net present value of this project? OA $63,993 OB.$59,226 OC. $30,495 OD. $10,729
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
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The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.
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