Stan Marsh, an investor, is considering two financing plans for purchasing a parcel of real estate costing $152,264. Alternative 1 involves paying cash; alternative 2 involves obtaining 82% financing at 9.4% interest. If the parcel of real estate appreciates in value by $17,153 in 1 year, calculate (a) Stan's net return and (b) his return on equity for each alternative. If the value dropped by $17,153, what effect would this have on your answers to parts a and b?

Stan Marsh, an investor, is considering two financing plans for purchasing a parcel of real estate costing $152,264. Alternative 1 involves paying cash; alternative 2 involves obtaining 82% financing at 9.4% interest. If the parcel of real estate appreciates in value by $17,153 in 1 year, calculate (a) Stan's net return and (b) his return on equity for each alternative. If the value dropped by $17,153, what effect would this have on your answers to parts a and b?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A real estate investor is considering the purchase of an apartment building that currently provides income of $30,000 and is expected to grow in income by 3% for the next 4 years. You would receive income from today, year 0, through year 4. At the end of year 4, they expect to sell the property for $800,000. The investor has a discount rate of 6%. How much should an investor be willing to pay for this property? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure.
Please Show me the calculations!! A real estate investor is considering the purchase of an apartment building that currently provides income of $30,000 and is expected to grow in income by 3% for the next 4 years. You would receive income from today, year 0, through year 4. At the end of year 4, they expect to sell the property for $800,000. The investor has a discount rateof 6%. How much should an investor be willing to pay for this property?
A local entreprenuer asks you to invest $10,000 in a business venture. Based on your estimate, you would receive nothing for three years at the end of the four you would receive $4900, and at the end of year five you would receive $14500. If you estimates are correct, what would be the IRR on this investmenet?
jacob has an opportunity to invest in a new retail development in his building. The initial investment is $53,000 and the expected annual cashflows thereafter are {$2,400; $4,000; $4,000; $7,500; $11,000; $11,000; $14,000; $14,000}. What is Jacob's IRR on this investment? (Allow two decimals in the percentage but do not enter the % sign.)
You are thinking about buying a real estate property. If you buy the property, you think you will sell it for $714663 in 8 years. If your required return on investments of this risk is 10.54%, what is the most that you should be willing to pay for the property? Round to 2 decimal places. Include a dollar sign ($) or percent (%) as appropriate.
John has an investment opportunity that promises to pay him $16,000 in four years. Suppose the opportunity requires John to invest $13,200 today. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) What is the interest rate John would earn on this investment? (Round your interest rate to the nearest whole percentage.) Solve for i Present Value: n = i = Future Value:
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An investor required 10% return on his money. A property had gross annual income of $110,000, a vancy rate of 4%, and operating expenses of $10,000. What would be the maximum price tht the investor would pay for the property?
What formula do I utilize to find out the annual net revenue I'll receive for a property? For example, If I were to purchase a commercial property for $8,950,000 with an interest rate of 3.5% and a term of 30 years. I put down 25% which is $2,237,500, which would make my loan amount equate to $6,712,500. This particular commercial real estate property has a NOI (Net Operating Income) of $494,040yr, the debt service is $361,705yr, and the cashflow is $132,335yr. Would my net revenue equate to $494,040yr or $132,335yr?
You are trying to evaluate the feasibility of purchasing a land. You plan to rent the plot of land to receive after-tax receipts of $2,500 per month. You are hoping to sell the land in the next ten years to receive after-tax proceeds of US$2.0 million to purchase a building containing at least four apartments. Assume the funds for purchasing the apartment will be drawn from your savings account which is currently earning 2% after taxes and that inflation rate is currently 5%. a) Identify the cash flows, their timing and the required rate of return applicable to calculating the maximum value you should pay for the land. b) Showing all calculations state if you should purchase the land for $1.6 million, justify your decision. What is the maximum price you should pay to acquire the single dwelling unit?
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You can buy property today for $2.1 million and sell it in 6 years for $3.1 million. (You earn no rental income on the property.) a. If the interest rate is 11%, what is the present value of the sales price? (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.) b. Is the property investment attractive to you? c-1. What is the present value of the future cash flows, if you also could earn $110,000 per year rent on the property? The rent is paid at the end of each year. (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.) c-2. Is the property investment attractive to you now?

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