Reference no: EM13985213
You are considering the purchase of an apartment complex.
The following assumptions are made:
The purchase price is $1,000,000.
Potential gross income (PGI) for the first year of operations is projected to be $171,000.
PGI is expected to increase at 4 percent per year.
No vacancies are expected.
Operating expenses are estimated at 35 percent of effective gross income. Ignore capital expenditures.
The market value of the investment is expected to increase 4 percent per year.
Selling expenses will be 4 percent.
The holding period is 4 years.
The appropriate unlevered rate of return to discount projected NOIs and the projected NSP is 12 percent.
The required levered rate of return is 14 percent.70 percent of the acquisition price can be borrowed with a 30-year, monthly payment mortgage.
The annual interest rate on the mortgage will be 8.0 percent.
Financing costs will equal 2 percent of the loan amount.
There are no prepayment penalties.
a. Calculate net operating income (NOI) for each of the four years.
b. Calculate the net sale proceeds from the sale of the property.
c. Calculate the net present value of this investment, assuming no mortgage debt. Should you purchase? Why?
d. Calculate the internal rate of return of this investment, assuming no debt. Should you purchase? Why?
e. Calculate the monthly mortgage payment. What is the total per year?
f. Calculate the loan balance at the end of years 1, 2, 3, and 4.
g. Calculate the amount of principal reduction achieved during each of the four years.
h. Calculate the total interest paid during each of the four years.
i. Calculate the levered required initial equity investment.
j. Calculate the before-tax cash flow (BTCF) for each of the four years.
k. Calculate the before-tax equity reversion (BTER) from the sale of the property.
l. Calculate the levered net present value of this investment. Should you purchase? Why?
m. Calculate the levered internal rate of return of this investment (assuming no debt and no taxes). Should you purchase? Why?
n. Calculate, for the first year of operations, the:
(1) Overall (cap) rate of return,
(2) Equity dividend rate,
(3) Gross income multiplier,
(4) Debt coverage ratio.
Calculate the fixed cost per unit
: Selected financial data for Spark Enterprises follows for a production level of 120,000 units: Total fixed costs $300,000 Total costs (fixed and variable) $450,000
|
What are the magnitude and the direction of the current
: A circular loop has radius R and carries current I2 in a clockwise direction (see figure). The center of the loop is a distance D above a long, straight wire. What are the magnitude and the direction of the current I1 in the wire if the magnetic f..
|
Write a letter of application to an advertised position
: Application letter: Write a letter of application to an advertised position. It should highlight your background and experience to explain precisely how you fit your reader's needs. You have to convince the prospective employer to interview you. You ..
|
Advantages of using social media for advertising
: What are the advantages and disadvantages of using social media for advertising, brand building, market research, and customer service
|
Calculate the total interest paid
: Calculate the levered internal rate of return of this investment (assuming no debt and no taxes). Should you purchase? Why?
|
Identify and discuss two contrasting uses of a musical style
: Identify and discuss two contrasting uses of a musical style topic in the underscoring (not a specific motive or reference (like "As Time Goes By," or "The French National Anthem," but a style topic in the sense of a "type" of melodic or rhythmic ges..
|
Regarding mandatory school uniforms
: Please post your proposed thesis statement for this topic. Remember, your thesis statement has a clear stance and is never a question. I am haveing a hard time coming up with a thesis regarding mandatory school uniforms. I am for the idea of school u..
|
Write the data analysis section of the methods
: write the Data Analysis section of the methods and the Results for an experiment, as if for publication in a journal. The experiment and results are completely fabricated and the purpose of the assignment is to demonstrate your ability to analyse ..
|
Example nestegg as metaphor.
: Post one example of a diction technique here: example nestegg as metaphor.
|