Do not give image format An investor is considering the acquisition of a "distressed property" which is on Northlake Bank's REO list. The property is available for$200,800 and the investor estimates that he can borrow $160,000 at 4.5 percent interest and that the property will require thefollowing total expenditures during the next year:InspectionTitle searchRenovationLandscapingLoan interestInsuranceProperty taxesSelling expenses$ 5121,02413,000Required:a. The investor is wondering what such a property must sell for after one year in order to earn a 20 percent return (IRR) on equity.b. The lender is now concerned that if the property does not sell, investor may have to carry the property for one additional year. Hebelieves that he could rent it (starting in year 2) and realize a net cash flow before debt service of $1,440 per month. However, hewould have to make an additional $7,440 in interest payments on his loan during that time, and then sell. What would the price have tobe at the end of year 2 in order to earn a 20 percent IRR on equity?Required A8247,2121,8126,0128,000Complete this question by entering your answers in the tabs below.Required BThe investor is wondering what such a property must sell for after one year in order to earn a 20 percent return (IRR) onequity.Note: Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.Sale value of property An investor is considering the acquisition of a "distressed property" which is on Northlake Bank's REO list. The property is available for$200,800 and the investor estimates that he can borrow $160,000 at 4.5 percent interest and that the property will require thefollowing total expenditures during the next year:InspectionTitle searchRenovationLandscapingLoan interestInsuranceProperty taxesSelling expensesRequired:a. The investor is wondering what such a property must sell for after one year in order to earn a 20 percent return (IRR) on equity.b. The lender is now concerned that if the property does not sell, investor may have to carry the property for one additional year. Hebelieves that he could rent it (starting in year 2) and realize a net cash flow before debt service of $1,440 per month. However, hewould have to make an additional $7,440 in interest payments on his loan during that time, and then sell. What would the price have tobe at the end of year 2 in order to earn a 20 percent IRR on equity?$ 5121,02413,0008247,2121,8126,0128,000Complete this question by entering your answers in the tabs below.Required A Required BThe lender is now concerned that if the property does not sell, investor may have to carry the property for one additional year.He believes that he could rent it (starting in year 2) and realize a net cash flow before debt service of $1,440 per month.However, he would have to make an additional $7,440 in interest payments on his loan during that time, and then sell. Whatwould the price have to be at the end of year 2 in order to earn a 20 percent IRR on equity?Note: Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.Sale value of propertyShow less

a) Sale price required in Year 1 to earn 20% IRR:Initial equity investment: Purchase price:…

Answered: An investor is considering the…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 21P

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An investor is considering the acquisition of a “distressed property” which is on Northlake Bank’s REO list. The property is available for $203,400 and the investor estimates that he can borrow $160,000 at 4.5 percent interest and that the property will require the following total expenditures during the next year: Inspection $ 551 Title search 1,102 Renovation 13,000 Landscaping 902 Loan interest 7,251 Insurance 1,851 Property taxes 6,051 Selling expenses 8,000 Required: a. The investor is wonderin
QuestionAt beginning of the year 2020, you have a bank loan and overdraft of $687,000 and the following Assets:Development cost Development $85,000Land and building $320,000Plant and Machinery $125,000Current asset: Inventory $210,000 and Receivables $500,000Current liability: Payables $393,000 and Revaluation gain on Land and Building is $50,000Note: In full satisfaction of the GHC687,000 owing, the bank agrees to accept an immediate payment of GHC87,000 and to consolidate the balance of GHC600,000 into a loan, carrying interest of 20% per annum, repayable in year 2020. The loan is to be secured by a fixed charge on the land and buildings and a floating charge on the company's remaining assets.How will you treat this transactions in the balance sheet.
An investor is considering the acquisition of a "distressed property" which is on Northlake Bank's REO list. The property is available for $200,800 and the investor estimates that he can borrow $160,000 at 4.5 percent interest and that the property will require the following total expenditures during the next year: Inspection Title search Renovation Landscaping Loan interest Insurance Property taxes Selling expenses Required: a. The investor is wondering what such a property must sell for after one year in order to earn a 20 percent return (IRR) on equity. b. The lender is now concerned that if the property does not sell, investor may have to carry the property for one additional year. He believes that he could rent it (starting in year 2) and realize a net cash flow before debt service of $1,440 per month. However, he would have to make an additional $7,440 in interest payments on his loan during that time, and then sell. What would the price have to be at the end of year 2 in order…
4. An investor is considering the acquisition of a "distressed property" which is on Northlake Bank's REO list. The property is available for $200,000 and the investor estimates that he can borrow $160,000 at 8 percent interest and that the property will require the following total expenditures during the next year: Inspection %24 500 Title search 1,000 Renovation 13,000 Landscaping 800 Loan interest 12.800 Insurance 1,800 Property taxes 6,000 Selling expenses 8.000 a. The investor is wondering what such a property must sell for after one year in order to earn a 20 Page 221 percent return (IRR) on equity. What other issues must he consider?
Consider an income property that is under evaluation for purchase with a $489,398 loan, 3.3% interest rate, compounded annually, amortized over 29 years. The NOI at the end of year 1 is $48,148, year 2 is $54,192, and year 3 is 55,470. At the end of year 3, the property is estimated to sell for $525,700. Discount the equity cash flows over the 3-year holding period at 6.0 percent. Using the principles of mortgage equity capitalization, what is the estimated total property value with a holding period of 3 years? Please post step by step solve.
Caddis Company acquired a building with a loan that requires payments of $19,000 every six months for 3 years. The annual interest rate on the loan is 8%. What is the present value of the building? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Multiple Choice O O O O $99,600 $114,000 $38,988 $65,402 $48,965
You have entered into an agreement for the purchase of land. The agreement specifies that you will take ownership of the land immediately. You have agreed to pay $35,000 today and another $35,000 in three years. Calculate the total cost of the land today, assuming a discount rate of (a) 3%, (b) 5%, or (c) 7%. (FV of $1. PV of $1. FVA of $1, and PVA of $1) (Use tables, Excel, or a financial calculator. Round your answers to 2 decimal places.) a. b. C Payment Amount $ 35,000 35,000 35,000 Interest Rate 3% 5% 7% Compounding Annually Annually Annually Period Due 3 years 3 years 3 years Total Cost of Land Today
The following data are from an after-tax cash flow analysis in year 1 for anew MACRS 5-year property. How much money would be saved in year 1 if 100% bonus depreciation is used? Initial Investment = $180,000 Regular MACRS Depreciation Deduction in Year 1 = $36,000 Before-Tax-and-Loan Cash Flow = $280,000 Loan Principal Payment = $17,500 Interest on Loan = $5,650. a. $30,240 b. $75,600 c. $37,800 d. $36,000.
You have been asked to estimate the market value of an income-producing property. The table below provides 5 years of projected cash flows for the property. Use the discounted cash flow approach to income valuation to calculate the market value. Assume that you sell the property at the end of year 5 and that the net proceeds from the sale are $5 million. Also assume that the discount rate is 10%. PGI EGI NOI Year 1 $4.18 million $750,000 $780,000 $811,200 $637,500 $663,000 $689,520 $318,750 $331,500 $344,760 $6.11 million $4.12 million Year 2 $4.40 million Year 3 Year 4 $843,648 $717,101 $358,550 Year 5 $877,394 $745,785 $372,892
A property was purchased by a property manager's client for $7,000, 000 with a $2, 000, 000 down payment and a 30 year. $ 5,000, 000 loan with a 7% interest rate. Grous potential income (GPI) for the property is expected to be $850, 000 in year one. Operating expenses are expected to be $350,000 in year one. Both are expected to increase by 3% each year. The property is expected to sell at the end of year five at a 7% going-out capitalization rate with 5% costs of sale. The investor's required rate of returns 12%.
1. The company is setting aside funds to acquire a property for its new warehouse. The company needs P74,735 to make the down payment. The company deposits P5,000/month in the fund account which pays 1% per month. As the financial manager you have been tasked to determine how long it will take to accumulate enough funds to acquire the property?
Explorer Company is considering the following investment proposal: Initial investment: Depreciable assets (straight-line) $28,800 Working capital 3,200 Operations (per year for 4 years): Cash receipts $20,000 Cash expenditures 8,800 Disinvestment: Salvage value of equipment $2,400 Recovery of working capital 3,200 Discount rate: 10 percent Additional information for interest rate of 10 percent and four time periods: Present value of $1 0.68301 Present value of an annuity of $1 3.16987 What is the net present value for the investment? Select one: a. $14,658 b. $35,503 c. $3,825 d. $7,327

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