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An investor is considering the purchase of an existing suburban office building approximately five years old. The building, when constructed, was estimated to have an economic life of 50 years, and the building-to-value ratio was 80 percent.
Based on current cost estimates, the structure would cost $5 million to reproduce today. The building is expected to continue to wear out evenly over the 50-year period of its economic life. Estimates of other economic costs associated with the improvement are as follows:
Repairable physical depreciation
$300,000 to repair
Functional obsolescence(repairable)
$200,000 to repair
Functional obsolescence(non repairable)
$25,000 per year rent loss
The land value has been established at $1 million by comparable sales in the area. The investor believes that an appropriate opportunity cost for any deferred outlays or costs should be 12 percent per year. What would be the estimated value for this property?
Cooke Co. is comparing two different capital structures. Plan I would result in 8,700 shares of stock and $323,000 in debt. Plan II would result in 12,000 shares of stock and $210,800 in debt. What is the price per share of equity under Plan I?
The Square Box is considering two independent projects, both of which have an initial cost of $18,000. The cash inflows of Project A are $3,000, $7,000, and $10,000 over the next three years, respectively.
Once the audit evidence is gathered and the testing is complete, how do you know there are no other items outstanding? To ensure the audit is complete, it is important to examine loss contingencies. What are some sources he can use to identify if los..
A 15-year, 14% semiannual coupon bond with a par value of $1,000 may be called in 4 years at a call price of $1,075. The bond sells for $1,050. What is the bond's yield to maturity? What is the bond's current yield? What is the bond's capital gain or..
Moraine, Inc., has an issue of preferred stock outstanding that pays a $3.15 dividend every year in perpetuity. If this issue currently sells for $92 per share, what is the required return?
If the continuously compounded interest rate is 10% per annum in the first year and 20% the following year, what is your total continuously compounded interest rate over the 2 years?
Vigo Vacations has $202 million in total assets, $4.9 million in notes payable, and $23.5 million in long-term debt. What is the debt ratio?
The exercise price of the options is $101 per share, all options are European and the stock does not pay any dividend. The call price is $12 per share and the put price is $5 per share. Both options mature in 1 year. Finally the annual rate of intere..
Describe the benefits and risks of investing in the current Global market. Be specific concerning present world events and market reactions/trends.
You have a chance to purchase a perpetual security that has a stated annual payment (cash flow) of $50. However, this is an unusual security in that the payment will increase at an annual rate of 5 percent per year; this increase is designed to help ..
Analysis of 60 monthly rates of return on United Futon common stock indicates a beta of 1.49 and an alpha of –0.24% per month. A month later, the market is up by 5.4%, and United Futon is up by 6.4%. What is Futon’s abnormal rate of return?
You are considering a project with an initial cash outlay of $80,000 and expected free cash flow of $21,600 at the end of each year for 6 years. the required rate of return for this project is 10.8 percent. a. what is the project's payback period? b...
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