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1. property A 3. time net operating income and time 0 purchase price time 0 1 2 3 4 5 6 7 8 9 10 time If the discount rate declines by 200 basis points (from 14% to 12%) the NPV of the investment would go from being negative to positive. True O False 2. If the appropriate discount rate for a real estate investors NPV analysis is the yield on 10-year treasury securities plus 400 basis points then the follow property would have had a higher NPV on 7/28/2021 than on 7/27/23. O True False 0 1 2 3 4 5 6 7 8 9 10 property A 0 1 2 3 4 5 ($2,000,000) $100,000.00 $100,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 6 7 8 9 10 $275,000.00 $275,000.00 $2,775,000.00 discount rate 14% net operating income and time 0 purchase price ($65,000,000) $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 net operating income and time 0 purchase price ($2,000,000) $15,000,000.00 $90,000,000.00 $0.00 $0.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $2,775,000.00 discount rate property B discount rate time 12% net operating income and time 0 purchase price 0 1 2 3 4 5 6 7 8 9 10 Property B has a greater NPV than property A. O True O False ($3,000,000) $0.00 $0.00 $0.00 $385,000.00 $385,000.00 $385,000.00 $385,000.00 $385,000.00 $385,000.00 discount rate 8% $3,585,000.00

1. property A 3. time net operating income and time 0 purchase price time 0 1 2 3 4 5 6 7 8 9 10 time If the discount rate declines by 200 basis points (from 14% to 12%) the NPV of the investment would go from being negative to positive. True O False 2. If the appropriate discount rate for a real estate investors NPV analysis is the yield on 10-year treasury securities plus 400 basis points then the follow property would have had a higher NPV on 7/28/2021 than on 7/27/23. O True False 0 1 2 3 4 5 6 7 8 9 10 property A 0 1 2 3 4 5 ($2,000,000) $100,000.00 $100,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 6 7 8 9 10 $275,000.00 $275,000.00 $2,775,000.00 discount rate 14% net operating income and time 0 purchase price ($65,000,000) $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 net operating income and time 0 purchase price ($2,000,000) $15,000,000.00 $90,000,000.00 $0.00 $0.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $2,775,000.00 discount rate property B discount rate time 12% net operating income and time 0 purchase price 0 1 2 3 4 5 6 7 8 9 10 Property B has a greater NPV than property A. O True O False ($3,000,000) $0.00 $0.00 $0.00 $385,000.00 $385,000.00 $385,000.00 $385,000.00 $385,000.00 $385,000.00 discount rate 8% $3,585,000.00

Financial Reporting, Financial Statement Analysis and Valuation
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter12: Valuation: Cash-flow Based Approaches
Section: Chapter Questions
Problem 12PC
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1. 2. 3. property A time 0 time net operating income and time 0 purchase price 1 2 3 4 5 10 6 7 8 9 time If the discount rate declines by 200 basis points (from 14% to 12%) the NPV of the investment would go from being negative to positive. O True O False If the appropriate discount rate for a real estate investors NPV analysis is the yield on 10-year treasury securities plus 400 basis points then the following property would have had a higher NPV on 7/28/2021 than on 7/27/23. O True O False 0 1 2 3 4 5 6 7 8 9 10 property A 0 1 2 3 4 5 ($2,000,000) $100,000.00 $100,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $2,775,000.00 6 7 8 9 10 discount rate 14% net operating income and time 0 purchase price net operating income and time 0 purchase price ($65,000,000) $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 $90,000,000.00 ($2,000,000) $0.00 $0.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $2,775,000.00 discount rate property B discount rate time 12% net operating income and time 0 purchase price 0 1 2 3 4 5 6 7 8 9 10 Property B has a greater NPV than property A. O True O False ($3,000,000) $0.00 $0.00 $0.00 $385,000.00 $385,000.00 $385,000.00 $385,000.00 $385,000.00 $385,000.00 $3,585,000.00 discount rate 8%
Transcribed Image Text:1. 2. 3. property A time 0 time net operating income and time 0 purchase price 1 2 3 4 5 10 6 7 8 9 time If the discount rate declines by 200 basis points (from 14% to 12%) the NPV of the investment would go from being negative to positive. O True O False If the appropriate discount rate for a real estate investors NPV analysis is the yield on 10-year treasury securities plus 400 basis points then the following property would have had a higher NPV on 7/28/2021 than on 7/27/23. O True O False 0 1 2 3 4 5 6 7 8 9 10 property A 0 1 2 3 4 5 ($2,000,000) $100,000.00 $100,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $2,775,000.00 6 7 8 9 10 discount rate 14% net operating income and time 0 purchase price net operating income and time 0 purchase price ($65,000,000) $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 $15,000,000.00 $90,000,000.00 ($2,000,000) $0.00 $0.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $275,000.00 $2,775,000.00 discount rate property B discount rate time 12% net operating income and time 0 purchase price 0 1 2 3 4 5 6 7 8 9 10 Property B has a greater NPV than property A. O True O False ($3,000,000) $0.00 $0.00 $0.00 $385,000.00 $385,000.00 $385,000.00 $385,000.00 $385,000.00 $385,000.00 $3,585,000.00 discount rate 8%
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