Complete this question by entering your answers in the tabs below.Required A Required BThe lender is now concerned that if the property does not sell, investor may have to carry the property for one additional year.He believes that he could rent it (starting in year 2) and realize a net cash flow before debt service of $1,440 per month.However, he would have to make an additional $7,440 in interest payments on his loan during that time, and then sell. Whatwould the price have to be at the end of year 2 in order to earn a 20 percent IRR on equity?Note: Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.Sale value of propertyShow less A An investor is considering the acquisition of a "distressed property" which is on Northlake Bank's REO list. The property is available for$200,800 and the investor estimates that he can borrow $160,000 at 4.5 percent interest and that the property will require thefollowing total expenditures during the next year:InspectionTitle searchRenovationLandscapingLoan interestInsuranceProperty taxesSelling expensesRequired:a. The investor is wondering what such a property must sell for after one year in order to earn a 20 percent return (IRR) on equity.b. The lender is now concerned that if the property does not sell, investor may have to carry the property for one additional year. Hebelieves that he could rent it (starting in year 2) and realize a net cash flow before debt service of $1,440 per month. However, hewould have to make an additional $7,440 in interest payments on his loan during that time, and then sell. What would the price have tobe at the end of year 2 in order to earn a 20 percent IRR on equity?Required A$5121,02413,000Complete this question by entering your answers in the tabs below.Required B8247,2121,8126,0128,000Sale value of propertyThe investor is wondering what such a property must sell for after one year in order to earn a 20 percent return (IRR) onequity.Note: Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.

a) Sale price required in Year 1 to earn 20% IRR:Initial equity investment: Purchase price:…

The lender is now concerned that if the property does not sell, investor may have to carry the property for one additional year. He believes that he could rent it (starting in year 2) and realize a net cash flow before debt service of $1,440 per month. However, he would have to make an additional $7,440 in interest payments on his loan during that time, and then sell. What would the price have to be at the end of year 2 in order to earn a 20 percent IRR on equity?

The lender is now concerned that if the property does not sell, investor may have to carry the property for one additional year. He believes that he could rent it (starting in year 2) and realize a net cash flow before debt service of $1,440 per month. However, he would have to make an additional $7,440 in interest payments on his loan during that time, and then sell. What would the price have to be at the end of year 2 in order to earn a 20 percent IRR on equity?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 16E

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