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The asking price for a suburban office building is $5,000,000; rents are estimated at $550,000 during the first year and are expected to grow at 2 percent per year thereafter. Vacancies and collection losses are expected to be 6 percent of rents. Operating expenses will be 35 percent of effective gross income. A 65% LTV loan can be obtained at 7.5 percent interest for 10 years (assume payment and interest is calculated on an annual basis, and the loan is fully amortizing over a 30 year period). The property is expected to appreciate in value at 3 percent per year and the holding period is expected to be five years. Selling expenses are estimated at 7% of the sales price. Assume the appropriate income tax rate is 25%, the rate of depreciation recapture is 25%, and the capital gain tax rate is 15%. The value of the improvements is estimated at 60% of the purchase price by an appraiser. Answer the following questions a) Calculate the effective gross income (EGI) and the net operating income (NOI) for each of the five years. b) Calculate the total debt service, interest payment, and amortization in each of the five years? c) Calculate the taxes due on the sale of the property. d) Calculate the after-tax internal rate of return on this investment. If the investor’s (after-tax) opportunity cost of capital is 10%, should she go ahead with this investment?
Chopra et al., 2013 describes six major drivers within the supply chain spectrum, facilities, inventory, transportation, information, sourcing, and pricing. How strategically are they related to the two major objectives of supply chain, that is respo..
Faircross Farms harvests its crops four times annually and receives payment for its crop 3 months after it is picked and shipped. However, planting, irrigating, and harvesting must be done on a nearly continual schedule. What is the effective annual ..
You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF 21 million. The cash flows from the project would be SF 5.9 million per year for the next five years. The dollar required ..
How much will the short fall amount to at the beginning of the retirement period and what lump sum will she need at the beginning of the retirement period?
How can Macy's corporation apply cultural change to the organization to improve overall growth of the company as a whole?
Which of the following argued that the value of a firm is independent of its capital structure?
You purchased 100 shares of ABC stock for $20 per share. One year later you received cash dividends of $1 per share and sold the stock for $22 per share. Your holding-period return was _______________. Compute the geometric average of the following r..
What is the expected return on an equally weighted portfolio of these three stocks? What is the variance of a portfolio invested 18 percent each in A and B and 64 percent in C?
Provide a summary of the entrepreneur and their successes that make them a notable entrepreneur and Describe how their good/service contributed to economic progress and Share what economic obstacles they faced in the marketplace that they had to over..
Which of the following statements regarding the efficient market hypothesis is NOT accurate?
The CEO would like to see higher sales and forecasted net income of $2,500,000. Assume that operating costs (excluding depreciation and amortization) are 5% of sales and that depreciation and amortization and interest expenses will increase by 10%. T..
The manager for a growing firm is considering the launch of a new product. If the product goes directly to market, there is a 50 percent chance of success. For $173,000 the manager can conduct a focus group that will increase the product’s chance of ..
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