You are considering the purchase of an apartment complex. The following assumptions are made:
The purchase price is $1,000,000.
Potential gross income (PGI) for the first year of operations is projected to be $171,000.
PGI is expected to increase 4 percent per year.
No vacancies are expected.
Operating expenses are estimated at 35 percent of effective gross income. Ignore capital expenditures.
The market value of the investment is expected to increase 4 percent per year.
Selling expenses will be 4 percent.
The holding period is 4 years.
The appropriate unlevered rate of return to discount projected NOIs and the projected NSP is 12 percent.
The required levered rate of return is 14 percent.
70 percent of the acquisition price can be borrowed with a 30-year, monthly payment mortgage.
The annual interest rate on the mortgage will be 8. 0 percent.
Financing costs will equal 2 percent of the loan amount.
There are no prepayment penalties.
Required:
a. Calculate net operating income (NOI) for each of the four years.
b. Calculate the net sale proceeds from the sale of the property.
c. Calculate the net present value of this investment, assuming no mortgage debt. Should you purchase? Why?
d. Calculate the internal rate of return of this investment, assuming no debt. Should you purchase? Why?
e. Calculate the monthly mortgage payment. What is the total per year?
Answers
Using trial and error or a financial calculator, we can find that the IRR is approximately 15.15%. Since the IRR is greater than the required
a. Calculation of Net Operating Income (NOI):
Year 1:
PGI = $171,000
Vacancy = $0
Effective Gross Income (EGI) = PGI - Vacancy = $171,000
Operating Expenses = 35% of EGI = $59,850
NOI = EGI - Operating Expenses = $111,150
Year 2:
PGI = $171,000 x 1.04 = $177,840
Vacancy = $0
EGI = PGI - Vacancy = $177,840
Operating Expenses = 35% of EGI = $62,244
NOI = EGI - Operating Expenses = $115,596
Year 3:
PGI = $177,840 x 1.04 = $185,433.6
Vacancy = $0
EGI = PGI - Vacancy = $185,433.6
Operating Expenses = 35% of EGI = $64,849.76
NOI = EGI - Operating Expenses = $120,583.84
Year 4:
PGI = $185,433.6 x 1.04 = $193,134.14
Vacancy = $0
EGI = PGI - Vacancy = $193,134.14
Operating Expenses = 35% of EGI = $67,489.95
NOI = EGI - Operating Expenses = $125,644.19
b. Calculation of Net Sale Proceeds:
Market value at the end of Year 4 = $1,000,000 x 1.04^4 = $1,174,240.64
Selling expenses = 4% of market value = $46,969.63
Net Sale Proceeds = Market value - Selling expenses = $1,127,271.01
c. Calculation of Net Present Value (NPV):
Year 1:
NOI = $111,150
PV of NOI = $111,150 / (1 + 12%)^1 = $99,196.43
Year 2:
NOI = $115,596
PV of NOI = $115,596 / (1 + 12%)^2 = $93,505.56
Year 3:
NOI = $120,583.84
PV of NOI = $120,583.84 / (1 + 12%)^3 = $92,932.54
Year 4:
NOI = $125,644.19
PV of NOI = $125,644.19 / (1 + 12%)^4 = $93,319.33
Net Sale Proceeds:
NSP = $1,127,271.01 / (1 + 12%)^4 = $818,372.67
NPV = PV of NOI + NSP - Initial Investment
NPV = $99,196.43 + $93,505.56 + $92,932.54 + $93,319.33 + $818,372.67 - $1,000,000
NPV = $197,327.53
Since the NPV is positive, it indicates that the investment is profitable and should be purchased.
d. Calculation of Internal Rate of Return (IRR):
NPV = PV of Cash Flows - Initial Investment
NPV = PV of NOI + NSP - Initial Investment
$197,327.53 = PVIFA(r%, 4) x Debt - $1,000,000
Using trial and error or a financial calculator, we can find that the IRR is approximately 15.15%.
Since the IRR is greater than the required
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Related Questions
Madam Shanna plans to buy a new car which cost RM 60,000 from a bank loan with an interest of 9% per year compounded every month. She will be required to pay 10% of down payment first and the balance will be paid by monthly installment for 7 years. Due to the high interest, she seeks help from a cooperative at her workplace. The interest imposed by the cooperative is slightly low which is 6% per year compounded every month. But in order to get a loan from the cooperative, one must become a member first for at least one year. Since she is just become a member, she is only entitling for the loan one year from now. She plans to proceed with the bank loan now and for next year she will continue the loan with the cooperative. The tenure will be for 7 years overall. (i) Calculate how much is the monthly installment to the bank? (ii) Calculate how much is the monthly installment to the cooperative?
Answers
The monthly installment to the bank will be approximately RM 804.78.
The monthly installment to the cooperative will be approximately RM 664.95.
(i) To calculate the monthly installment for the bank loan, we can use the formula for the present value of an annuity. The loan amount is RM 60,000 minus the down payment of 10%, which is RM 6,000.
Loan amount = RM 60,000 - RM 6,000 = RM 54,000
The interest rate is 9% per year, compounded monthly. The loan tenure is 7 years, which means 7 x 12 = 84 months.
Using the formula:
Monthly installment = (Loan amount * Monthly interest rate) / (1 - (1 + Monthly interest rate)^(-Number of months))
First, we need to convert the annual interest rate to a monthly interest rate:
Monthly interest rate = (1 + Annual interest rate)^(1/12) - 1
= (1 + 0.09)^(1/12) - 1
≈ 0.00742
Plugging the values into the formula:
Monthly installment = (RM 54,000 * 0.00742) / (1 - (1 + 0.00742)^(-84))
≈ RM 804.78
Therefore, the monthly installment to the bank will be approximately RM 804.78.
(ii) Since Madam Shanna is only eligible for the cooperative loan one year from now, the loan tenure with the cooperative will be 6 years (7 years - 1 year). The loan amount for the cooperative will be the remaining balance after deducting the down payment and one year of payments made to the bank.
Remaining balance = Loan amount - (Monthly installment * Number of months)
Remaining balance = RM 54,000 - (RM 804.78 * 12)
= RM 43,336.16
The interest rate for the cooperative loan is 6% per year, compounded monthly.
Using the same formula as above with the adjusted values:
Monthly installment = (Remaining balance * Monthly interest rate) / (1 - (1 + Monthly interest rate)^(-Number of months))
Monthly interest rate = (1 + Annual interest rate)^(1/12) - 1
= (1 + 0.06)^(1/12) - 1
≈ 0.00488
Monthly installment = (RM 43,336.16 * 0.00488) / (1 - (1 + 0.00488)^(-72))
≈ RM 664.95
Therefore, the monthly installment to the cooperative will be approximately RM 664.95.
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at the end of the year, inventory has a cost of $200,000 and a net realizable value of $195,000 due to normal business circumstances. prepare the year-end adjusting entry, if any, for inventory using the lower of cost or net realizable value approach.
Answers
To prepare the year-end adjusting entry for inventory using the lower of cost or net realizable value (NRV) approach, we compare the cost of inventory with its NRV and make an adjustment if the NRV is lower.
In this case, the NRV of inventory is $195,000, which is lower than its cost of $200,000.The adjusting entry would be as follows:
Debit: Cost of Goods Sold - $5,000
Credit: Inventory - $5,000
By debiting the Cost of Goods Sold account, we reduce the value of inventory that will be expensed on the income statement. The credit to the Inventory account reduces its value on the balance sheet. This adjustment reflects the decrease in the value of inventory to its net realizable value due to normal business circumstances.
It's important to note that this is a general example, and the specific accounts used may vary depending on the company's chart of accounts and accounting policies
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Which document determines the number of shares in a company?
a stock prospectus
an annual bill of rights
a corporate charter
an annual report
Answers
Answer:
C. a corporate charter
A Corporate Charter is document determines the number of shares in a company.
What is Corporate Charter?
Corporate charter is a legal document which is issued with the Secretary of State or registrar in order to establish a company as a corporation and contain every detailed information about company's share. The corporate charter contain information about governance, structure, objectives, operation, other information about the company and information about that total company shares and how much the company is willing to sell.
Therefore, A Corporate Charter is document determines the number of shares in a company
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What are the costs and benefits of having
insurance.
Answers
Answer:
Improved Health Increases Savings Organized Consistent Check-Ups Safeguarding Finances
Explanation:
What is wrong with the following email? Be specific SUBJECT LINE: PROJECT ON SAVING THE SEALS Attention: Amy Wright: In reviewing our project on saving the seals from Florida. We have come to the conclusion we still need more information on this subject to be allowed funding for this project. Can you give me more information on where the donated funds will be directed to? These are some of the questions raised in our meeting last week with the CEO, Also will we need to send employees there for work? Will we need to fand the airfare and expenses if travel is involved? How many other companies are involved in the fund raising of "Saving the seast" We will need to set up a meeting shortly to discuss this further. I am sure have more questions, I just can't think of them now, Regards, M. Manager of Advertising & Promotions ENFIOIA
Answers
Which of the following describes how the U.S. government protects and supports farmers and ranchers?
through establishing and maintaining food standards
through programs that provide direct payments
through allowing agribusiness companies to create oligopolies
through strict measures of qualis for commodities
first one to get it right gets Brainliest
Answers
Answer:
through allowing agribusiness companies to create oligopolies
Explanation:
Answer:
through programs that provide direct payments
Explanation:
The United States government gives free money to farmers and ranchers through a government subsidiary.
Please I need help!!
Answers
Answer:
A
Explanation:
What type of economy is the South African economy?
Answers
Answer:South Africa has a mixed economy in which there is a variety of private freedom, combined with centralized economic planning and government regulation.
Explanation:
Answer:
South Africa has a mixed economy in which there is a variety of private freedom, combined with centralized economic planning and government regulation.
Explanation:
No Explanations
A company has deposited an NSF check in its bank account. Which adjustment must be done in the bank reconciliation statement?
A. The amount must be added to the checkbook balance.
B. The amount must be deducted from the checkbook balance.
C. The amount must be added to the bank balance.
D. The amount must be deducted from the bank balance.
Answers
Answer:
B. The amount must be deducted from the checkbook balance.
Explanation:
A bank reconciliation mainly computed by an accountant, gives the difference between the balance in relation to the bank statement and the cash balance with respect to the accounting records of the depositor in a particular financial institution.
In Financial accounting, a bank statement can be defined as an official summary or list of financial transactions, which typically comprises of the amount of money that has been paid into or withdrawn from an account by an individual or business entity over a specific period of time.
Generally, a bank statement usually has the following information charges, deposits, withdrawals, including the opening and closing balance for each account held at a given the period. Thus, bank customers are advised to frequently reconcile their records with bank statements in order to prevent not-sufficient funds (NSF) checks.
A not-sufficient funds (NSF) checks refers to a check that isn't honored by the bank of the issuer due to the fact that the individual or business entity has an insufficient fund. It is also known as a bounced or bad check
In this scenario, a company has deposited an NSF check in its bank account. The adjustment which must be done in the bank reconciliation statement is that, the amount must be deducted from the checkbook balance.
Explain how most businesses are both debtors and creditors.
Answers
Answer:
The reason why most companies are both debtors and creditors is that customers can owe services to companies and they have economic commitments to pay.
Since the mid-1990s, many brick-and-mortar stores have seen a decline in sales while many online retailers have prospered. This situation is best identified as an example of the fact that Select one: a. when change comes, one can never predict who the winners and losers will be. b. the companies that adapt to the latest IT developments are the ones that win out in the long run. c. advancing IT has provided a great number of jobs in the customer-service industries. d. some companies have benefited from advancing IT, while others have been threatened by it.
Answers
When a state acts in its sovereign capacity, __________. Multiple Choice it has the right to forgive corporations for violations of the Clayton Act it can legalize bribery it is liable for triple damages it can force defendants to civil suits to enter a plea of nolo contendere it is immune from federal antitrust scrutiny
Answers
When a state acts in its sovereign capacity, it is immune from federal antitrust scrutiny.
What is Federal Antitrust Law?Antitrust laws, also known as competition laws, are regulations created by the American government to defend consumers from unfair commercial practices. In an open-market economy, they make sure there is fair competition. Along with the market, these rules have developed, vigilantly preventing potential monopolies and interference with the healthy flow of competition.Market allocation, bid rigging, price fixing, and monopolies are just a few of the commercial practices that are subject to antitrust legislation. We look at the behaviors that these laws forbid below.Without these restrictions, customers would not benefit from a variety of options or market competition.Know more about Federal Antitrust Law with the help of the given link:
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what is the main problem with government guarantees that socialize losses and privatize gains?
Answers
The main problem with government guarantees that socialize losses and privatize gains is that they create moral hazard.
When people or organizations take bigger risks knowing that a government guarantee will partially cover any losses, this is known as moral hazard.
Given the incentive to accept risky bets knowing that any losses will ultimately fall on taxpayers, this can encourage reckless behavior's on the part of investors.
This leads to an imbalance of incentives, which can have detrimental long-term effects like increased risk-taking, lower accountability, and decreased competition and innovation.
Long-term, this may have a negative impact on the markets and the economy in general.
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Select the correct answer.
What economic concept is applied in this statement?
By earning higher levels of education, students learn skills and are more likely to be employed. In their jobs, they use their skills to provide goods
and services to others.
Answers
The economic concept that is applied in the statement is D. positive externality.
What is a positive externality?Positive externality refers to the production and consumption of a good or service that benefits some other third parties, who are not directly involved in the transaction.
Some examples of activities that create positive externality include:
EducationVaccinationLocal investmentsBuilding of infrastructure.Thus, the economic concept that is applied in the statement is D. positive externality.
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Kira, the general manager of a travel agency, believes that her workers are responsible and capable, and that they can be trusted when given responsibility. Kira is an example of a ________ manager.
Answers
Kira is a theory Y manager if she believes that her workers are capable and can be trusted to meet up with responsibilities.
Who is a Theory Y manager?This is a term that is used to refer to managers or people that have an optimistic approach to life and people.
The people like Kira are trusting and love to use a participatory style of management.
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A non-transaction deposit would include each of the following, except:
a. a savings account.
b. a checking account.
c. a passbook savings account.
d. a certificate of deposit.
Answers
A non-transaction deposit would include each of the following, except: c. a passbook savings account.
Non-transactional deposits: what are they?A deposit made to a non-transaction account is known as a time deposit. This kind of account typically bears interest and has a maturity date. With regard to these types of accounts, withdrawals might be capped. Some savings accounts and CDs may be considered non-transaction accounts.
Non-transaction deposit accounts, such as savings accounts, are those that have restrictions on monthly transfers or impose waiting periods before allowing access to funds. Individual retirement accounts (IRAs) and certificates of deposit (CDs) are two types of non-transaction accounts.
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Suppose Marcus eats nothing but burritos for dinner. He buys 30 burritos each month. During the last couple of weeks, Marcus noticed an decrease in the price of burritos. The price of burritos rose from $6.00 per burrito last month to $5.00 per burrito this month. Assume that Marcus has a fixed income of $180 that he can spend on burritos. How many burritos can Marcus afford to buy at the new price of $5.00?
Answers
The number of burritos that Marcus can afford to buy at the new price is 36.
What is division?
Division is the process of parting a number into equal parts using another number. The sign used to denote division is ÷.
How many burritos can Marcus now afford?Number of burritos = income / new price
$180 / $5 = 36
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Your credit card has a credit limit of $1,000. Your credit card company reviews your credit line every 6 months.
Answers
The time it will take to increase the limit to $1,600 is 2.5 years, when the credit card has a credit limit of $1,000.
What is a credit card?A credit card is a payment card issued to users or cardholders to enable the cardholder to pay a merchant for goods and services based on the cardholder's accrued debt that is promised to the card issuer to pay them for the amounts plus the other agreed charges. The card issuer usually a bank or credit union creates a revolving account and grants a line of credit to the cardholder, from which the cardholder can borrow money for payment to a merchant or as a cash advance.
A credit card is different from a debit card.
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Your question was incomplete, your full question probably was:
Your credit card has a credit limit of $1,000. Your credit card company reviews your credit line every 6 months. They will not increase your credit line more than 10% each 6-month period. Assuming they increase your limit each 6-month period by 10%, how long will it take to increase your limit to $1,600?
Calvin deposits $400 in a savings account that accrues 5% interest compounded monthly. after c years, calvin has $658.80. makayla deposits $300 in a different savings account that accrues 6% interest compounded quarterly. after m years, makayla has $613.04. what is the approximate difference in the number of years that calvin and makayla have their money invested? makayla invests her money 1 year longer. makayla invests her money 2 years longer. calvin invests his money 1 year longer. calvin invests his money 2 years longer.
Answers
According to equation, the approximate difference between Calvin and Makayla's number of years of money invested is 2 years.
What is compound interest?
Compound interest is refers to an amount implemented on the principal amount along wit the accumulated interest with a fixed rate of interest for a time period.
Solution:-
Given Information:
Calvin deposits= $400Interest rate=5%final amount Calvin =$658.80
Here, Compound interest= A=P (1+r/t)t
Monthly compound interest,
658.8=400(1+5/12*100)12c
658.8/400=(1205/1200)12c
c=10 years
Now Makayla deposits $300 in a different savings account that accrues 6% interest compounded quarterly. The final amount she gets is $613.4 in m years. Thus,
613.4=300(1+6/12*100)12m
613.4/300=(1206/1200)12m
c=12 years.
Thus, the approximate difference in the number of years that Calvin and Makayla have their money invested is 2 years.
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Answer:
B. Makayla invests her money 2 years longer.
Explanation:
The cost of campaigning requires candidates to conduct extensive
activities.
O community service
O fund-raising
O illegal
O campaigning
Answers
Answer:
fund-raising
Explanation:
Running for a political office is an expensive affair. The candidate and political party require a lot of money to run a successful campaign. To raise funds needed to conduct campaigns, political parties and candidates organize fundraising activities and events.
Community service and campaigning are good platforms to woe voters but cannot generate funds to run for a political office.
What is the difference between Money
Market and Investments?
Answers
Answer:
can udo a pic so i can see
Explanation:
An SEP-IRA is intended for taxpayers who work for large corporations. True False
Answers
False. The statement is incorrect. An SEP-IRA (Simplified Employee Pension Individual Retirement Account) is not specifically intended for taxpayers who work for large corporations. In fact, SEP-IRAs are designed to provide a retirement savings option for self-employed individuals, small business owners, and their employees.
SEP-IRAs offer a simplified and flexible retirement plan option for small businesses, including sole proprietorships, partnerships, and small corporations. They allow employers to make tax-deductible contributions to the SEP-IRA accounts of eligible employees. These contributions are generally based on a percentage of the employee's compensation, subject to certain limits.
SEP-IRAs provide a way for individuals and small business owners to save for retirement while enjoying potential tax benefits. The contributions made by the employer to the SEP-IRA accounts are tax-deductible, and the earnings in the account grow tax-deferred until retirement when withdrawals are made.
Unlike traditional IRAs, SEP-IRAs do not have income restrictions or complex administrative requirements, making them an attractive retirement savings option for small businesses and self-employed individuals.
In summary, an SEP-IRA is not specifically intended for taxpayers who work for large corporations but rather for self-employed individuals and small business owners seeking a simplified retirement savings plan.
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assume the following information: milling department units percent complete materials conversion beginning work in process inventory 200 40% 30% units started into production during march 6,200 units completed during the period and transferred to the next department 5,800 100% 100% ending work in process inventory 600 70% 60% milling department materials conversion cost of beginning work in process inventory $ 10,000 $ 15,000 costs added during the period 290,000 385,000 total cost $ 300,000 $ 400,000 using the weighted-average method, the total cost of the ending work in process inventory with respect to conversion is closest to:
Answers
Total cost of ending work in process inventory = $30,510
The average cost of the process using the weighted-average method is the closest cost in terms of conversion to $46.95.
1 Material equivalent units = 5,800 + (600 × 70%) = 6,220 units
Cost per equivalent unit = (10,000 + 282,000) / 6,220 = $46.95
Option $46.95 is CORRECT
2 Equivalent unit of material =5,800 + (600 × 70%) = 6,220 units
Cost per equivalent unit of material = 297,000 / 6,220 = $47.75
Equivalent unit of material in ending inventory = 600 × 70% = 420 units
Cost of ending work in process with respect to material = 420 × 47.75 = $20,055
3 Equivalent unit of unit completed in material = 5,800 units
Equivalent unit of material = 5,800 + (600 × 70%) = 6,220 units
Cost per equivalent units of material= 292,000 / 6,220 = $46.95
Total cost of unit completed with respect to material = 5,800 × 46.95 = $272,310
4 Equivalent units of ending inventory in material = 600 × 50% = 300 units
Equivalent units of ending inventory in conversion cost = 600 × 40% = 240 units
Equivalent unit of material = 5,800 + 300 = 6,100 units
Equivalent unit of conversion cost = 5,800 + 240 = 6,040 units
Cost per equivalent units of material = 300,000/6,100 = $49.18
Cost per equivalent unit of conversion cost = 396,500/6,040 = $65.65
Total cost of ending work in process inventory = (300 × 49.18) + (240 × 65.65) = $30,510
5 Equivalent unit of material = 5,800 + (600 × 50%) = 6,100 units
Equivalent unit of conversion cost = 5,800 + (600 × 30%) = 5,980 units
Equivalent unit of units completed in material = 5,800
Equivalent unit of units completed in conversion cost = 5,800
Cost per equivalent units of material = 300,000/6,100 = $49.18
Cost per equivalent units of conversion cost = 396,500/5,980 = $66.30
Total cost of units completed and transferred out
= (5,800 × 49.18) + (5,800 × 66.30) = $669,784
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Davis is planning to buy a bike. He has the full amount in his bank account. He does not want to pay any interest on his purchase. Which option(s) can Davis use when making the purchase
Answers
Answer:
C
Explanation:
You are a human resources manager. What are some of the things you need to be thinking about in order to make the company be able to attract, train and retain
employees? Plz help this is urgent.
Answers
Answer:
Administrative expert. Administrative tasks remain a major part of the HR role.
HRM knowledge and expertise. ...
Proactivity. ...
Advising. ...
Coaching. ...
Recruitment and selection. ...
HRIS knowledge.
I hope this helps! :)
X Company, which uses the gross method and a perpetual inventory system, sold $2,000 of merchandise on account with credit terms of 2/10,n/30. If the customer pays within the discount period and takes the discount, X will record a journal entry that includes ______. (Check all that apply.)
Answers
Answer.
Explanation.
20 Characters long
how are host cities specifically impacted economically super bowl
Answers
Host cities of Super Bowl can experience significant economic impacts from the event.
What are economic impacts?Economic impacts refer to the effects that an event or policy has on the economy. These impacts can be positive or negative, and can occur at the local, national, or global level. Positive economic impacts can include increased employment opportunities, growth in industries, increased tax revenue for governments, and improvements in infrastructure. Negative economic impacts can include job loss, decreased economic activity, increased costs for consumers, and reduced government revenue. Economic impacts can be caused by a variety of factors, including natural disasters, changes in government policies, technological advances, and shifts in consumer behavior. Understanding economic impacts is important for policymakers, businesses, and individuals in order to make informed decisions that can help mitigate negative impacts and maximize positive impacts on the economy.
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Complete Question:
how are host cities specifically impacted economically super bowl?
(02.10 LC) What strategy works best to get out of a rut?
A) Attitude
B) Belief
C) Flexibility
D) Selling out
Answers
Answer is C Flexibility because that's the only thing that goes in the exercise category.
Explanation: I hoped that Helped!!
Answer:
Flexibility.
Explanation:
Cognitive flexibility refers to the brain’s ability to transition from thinking about one concept to another. The quicker you are able to switch or “shift” your thinking from one dimension (e.g. color of an object) to another (e.g. shape of an object), the greater your level of cognitive flexibility.
Post-Assessment
Question 2 of 5
Why is buying a car considered "bad debt"?
It decreases in value over time
It increases your net worth as it build equity
It gives you transportation to and from your job
It is worth more than any other investment
Submit
Continue
E
Answers
The reason why buying a car considered "bad debt"is that It decreases in value over time. option A
What is bad debt?The term bad debt can be described as the amount of money that a creditor must write off as a result of a default on the part of the debtor in a case whereby the creditor has a bad debt on the books, then things turn to uncollectible and is recorded as a charge-off.
It should be noted that a case can be regarded as bad debt because the value of the asset you receive from the loan depreciates quickly however in some cases interest charges increase how the amount that is been paid for the vehicle. and in thius case cost is higher compare to what it would be if you'd purchased the car outright with cash.
Hence, option A is correct.
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1. Which of the following BEST defines a down payment?
1. A down payment is a portion of the purchase price that increases the loan amount.
2. The down payment is the good faith escrow deposit.
3. A down payment is a portion of the purchase price that reduces the loan amount.
4. The down payment is the total amount borrowed for purchasing or leasing a car.
Answers
Answer:
3
Explanation:
It has to be this one because it is intial payment to help someone.