An investor is considering buying an apartment complex for $2,000,000 that has a projected year one NOI of $140,000 and the NOI is expected to increase three percent annually. The investor intends to hold the property five years, sell it for a price calculated by capitalizing the sixth year NOI at seven percent (round the sale price to the nearest $1,000), and incur a cost of sale of four percent of the projected sale price. The tax assessor shows the improvements to be 80 percent of the total value. The investor's marginal tax rate is 37 percent, capital gains rate is 20 percent, and cost recovery recapture rate is 25 percent. What is the "Without Financing/After Tax" Internal Rate of Return (rounded to nearest whole percent? 7 percent 8 percent 9 percent 10 percent
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- An investor anticipates that land values for a site will be worth $150,000 in five years. Assume real estate taxes are expected to be $2,000 each year (paid at the end of each year) for the next five years and the investor can rent the parcel for $2,400 per year to a billboard company (also paid at the end of each year). How much can the investor pay today for the site and still earn a 15 percent annual return on his investment?Assume that you are about to sell property (a vacant parcel of real estate) you own but otherwise have no use for. The net-of-sales-commission selling price for the property is $500,000. You are willing to finance this transaction over a 20-year period and have told the buyer that you expect a 12% pretax return on the transaction. The buyer has asked you for a payment schedule under several alternatives. Required: 1. What will be your periodic cash receipt, to earn a 12% return, if payments are received from the purchaser: NOTE: to answer the above questions, use the PMT function in Excel, as follows: PMT(rate,nper,pv,fv,type) where: rate is the interest rate for the loan, nper is the total number of payments, pv is the present value (i.e., the total amount that a series of future payments is worth now; also known as the principal), fv is the future value (or a cash balance you want to attain after the last payment is made; if fv is omitted, it is assumed to be 0 (zero)), and…Assume that you are about to sell property (a vacant parcel of real estate) you own but otherwise have no use for. The net-of-sales- commission selling price for the property is $450,000. You are willing to finance this transaction over a 14-year period and have told the buyer that you expect a 11% pretax return on the transaction. The buyer has asked you for a payment schedule under several alternatives. Required: 1. What will be your periodic cash receipt, to earn a 11% return, if payments are received from the purchaser: NOTE: to answer the above questions, use the PMT function in Excel, as follows: PMT(rate,nper, pv,fv,type) where: rate is the interest rate for the loan, nper is the total number of payments, pv is the present value (i.e., the total amount that a series of future payments is worth now; also known as the principal), fv is the future value (or a cash balance you want to attain after the last payment is made; if fv is omitted, it is assumed to be 0 (zero)), and type is…
- Assume that you are about to sell property (a vacant parcel of real estate) you own but otherwise have no use for. The net-of-sales- commission selling price for the property is $470,000. You are willing to finance this transaction over a 19-year period and have told the buyer that you expect a 9% pretax return on the transaction. The buyer has asked you for a payment schedule under several alternatives. Required: 1. What will be your periodic cash receipt, to earn a 9% return, if payments are received from the purchaser: NOTE: to answer the above questions, use the PMT function in Excel, as follows: PMT(rate,nper.pv.fv.type) where: rate is the interest rate for the loan, nper is the total number of payments, pv is the present value (ie.. the total amount that a series of future payments is worth now, also known as the principal), v is the future value (or a cash balance you want to attain after the last payment is made; if fvis omitted, it is assumed to be 0 (zero)), and type is the…An investor has an opportunity to invest in a rental property that willprovide net cash returns of $400 per year for three years. The investor believes that an annual return of 10 percent should be earned on this investment. How much should the investor pay for the rental property?You are considering the purchase of a property today for $400,000. You plan to finance 60.00% of the purchase price with a loan. The appreciation rate on the property value is expected to be 5.00% annually for the next three year Calculate the EAHE. please work it out in excel
- An investor would like to purchase a new apartment property for $2.2 million. However, she faces the decision of whether to use 70 percent or 80 percent financing. The 70 percent loan can be obtained at 4 percent interest for 20 years. The 80 percent loan can be obtained at 5 percent interest for 20 years. NOI is expected to be $150,000 per year and increase at 2 percent annually, the same rate at which the property is expected to increase in value. The building and improvements represent 80 percent of value and will be depreciated over 39 years (1 ÷ 39 per year) with no mid-month convention for year 1. The project is expected to be sold after five years. Assume a 35 percent tax bracket for ordinary income, a 25 percent for depreciation recapture, and 20 percent for capital gains taxes. Required: a. What would the BTIRR and ATIRR be at each level of financing (assume monthly mortgage amortization)? b. What is the break-even interest rate (BEIR) for this project? c. What is the…An investor has $60,000 to invest in a $280,000 property. He can obtain either a $220,000 loan at 9.5 percent for 20 years or a $180,000 loan at 9 percent for 20 years and a second mortgage for $40,000 at 13 percent for 20 years. All loans require monthly payments and are fully amortizing.a. Which alternative should the borrower choose, assuming he will own the property for the full loan term?b. Would your answer change if the borrower plans to own the property for only five years?c. Would your answers to (a) and (b) change if the second mortgage had a 10-year term?Cromwell is acquiring some land for $1,200,000 in exchange for semiannual payments of $75,000 at an interest rate of 6.35 percent. How many years will it take Cromwell to pay for this purchase? Can the excel solution be provided?
- A builder is offering $100,000 loans for his properties at 9 percent for 25 years. Monthly payments are based on current market rates of 9.5 percent and are to be fully amortized over 25 years. The property would normally sell for $110,000 without any special financing.a. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan? Assume that the buyer would have the loan for the entire term of 25 years.b. How would your answer to part (a) change if the property is resold after 10 years and the loan repaid?An investor would like to purchase a new apartment property for $2 million. However, she faces the decision of whether to use 70 percent or 80 percent financing. The 70 percent loan can be obtained at 10 percent interest for 25 years. The 80 percent loan can be obtained at 11 percent interest for 25 years. NOI is expected to be $190,000 per year and increase at 3 percent annually, the same rate at which the property is expected to increase in value. The building and improvements represent 80 percent of value and will be depreciated over27.5 years (1 ÷ 27.5 per year). The project is expected to be sold after five years. Assume a 36 percent tax bracket for all income and capital gains taxes. a. What would the BTIRR and ATIRR be at each level of financing (assume monthly mortgage amortization)? BTIRR ATIRR 70% Loan 80% Loan % % b. What is the break-even interest rate (BEIR) for this project? % % %Suppose that you purchase an investment property for $8 million If you purchased the property with a 15year loan for 90 of the purchase price with an annual interest rate of 10 with monthly payments and monthly compounding, what was your initial equity investment for this property