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Annual cash flow probability

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Reference no: EM13548137

6) Consider the following information about a parcel of real estate that has a cost of $1.0 million:

Annual Cash Flow Probability
$200,000 .4
$180,000 .6


a) What is the expected annual percentage return on this property?


Solution: 80,000 + 108,000 = $188,000

b) If an investor can borrow 70%of the value (cost) at 12% (interest only), what is the expected return on equity?

Solution: 34.67%

Reference no: EM13548137

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