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Bahrah Corporation is interested in buying a 50-unit apartment complex, and renting out the individual apartments at $600 per month. The tenants pay their own heat and utilities. The company estimates the land value as 20% of the total value of the complex. Bahrah expects to sell the property after 10 years at a price that is 50% higher than its current value. Bahrah will depreciate the buildings on a straight-line basis over 25 years. Bahrah estimates maintenance expenses, including real estate taxes, to be 20% of the rental income. Assume that all cash flows occur at the end of each year. The discount rate for this investment is 12%, and the tax rate of Bahrah is 30%. Calculate the price that Bahrah should pay for the complex just to break even.
Fred and Frieda have always wanted to enter the blueberry business. They locate a 50- acre piece of hillside in Maine that is covered with blueberry bushes. Assume that the land can be sold for only $50,000 at the end of 20 years (a capital loss of $..
Pullman Corp issued 10-year bonds four years ago with a coupon rate of 10.34 percent. At the time of issue, the bonds sold at par. Today bonds of similar risk and maturity must pay an annual coupon of 5.56 percent to sell at par value. Assuming semia..
Luis has $120,000 in his retirement account at his present company. Because he is assuming a position with another company, Luis is planning to "roll over" his assets to a new account. Luis also plans to put $3000/quarter into the new account until h..
A 6.65 percent coupon bond with fifteen years left to maturity is priced to offer a 8.3 percent yield to maturity. You believe that in one year, the yield to maturity will be 8.0 percent. What is the change in price the bond will experience in dollar..
Facebook went public in 2012. Was there any agency conflict prior to that time? Is there a conflict now? How has the agency relationship changed since the IPO?
What is the present value of a 6-year annuity of $2,250 per period in which payments come at the beginning of each period? The interest rate is 10 percent. Use Appendix D for an approximate answer, but calculate your final answer using the formula an..
The XYZ Company just paid a dividend of D0 = $1.50 per share, and that dividend is expected to grow at a constant rate of 5.00% for the first 2 years and then 2% per year from year 3 till forever. The company's beta is 1.1, the expected market return..
A stock sells for $20. The next dividend will be $3 per share. If the return on equity ROE is a constant 10% and the company reinvests 30% of earnings in the firm, what must be the opportunity cost of capital?
A company produces a single product. Variable production costs are $13.6 per unit and variable selling and administrative expenses are $4.6 per unit. Fixed manufacturing overhead totals $52,000 and fixed selling and administration expenses total $56,..
A project has a 20% chance of having a rate of return of 400% in 1 year and an 80% chance of losing half your money. What is the standard deviation of this investment?
The Aggie Company has EBIT of $50,000 and market value debt of $100,000 outstanding with a 9% coupon rate. The cost of equity for an all equity firm would be 14%. Aggie has a 35% corporate tax rate. Investors face a 20% tax rate on debt receipts and ..
What is the effective (annual) yield of a T-Bill selling at $97,645 with par value $100,000 and time to maturity of
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