Question

Your friend has a rental property that nets $750 a month in income. He wants to...

Your friend has a rental property that nets $750 a month in income. He wants to sell you a 20 year equity share of the property that will pay $200 a month. If your discount rate is 4.5%, how much are you willing to pay for the share of the property?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1


Using financial calculator BA II Plus - Input details:

#

I/Y = Rate/Frequency = 4.5/12 =

              0.375000

PMT =

-$200.00

N = Number of years x frequency = 20*12 =

240

FV = Future Value =

$0.00

CPT > PV = Present\value =

$31,613.09

Formula based present value of annuity:

PV = |PMT| x ((1-(1+R)^-N)/R = 200*(1-(1+0.375%)^-240)/0.375% =

$31,613.09

The value that can be paid for $200 monthly income is $31,613.09

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
One of your Client wants to purchase a Rental Property that is generating $2,500 per month...
One of your Client wants to purchase a Rental Property that is generating $2,500 per month in Rents. You have decided to use Gross Rent Multiplier (GRM) method, using the recently sold following comparable Rental properties in order to calculate the Value of the subject property: Property Rent Pm Sold for Weight 1 $ 1,800.00 $ 657,000.00 20% 2 $ 2,100.00 $ 700,000.00 25% 3 $ 1,500.00 $ 520,000.00 20% 4 $ 2,700.00 $ 785,000.00 35% Based on your calculation,...
Your friend wants to borrow money from you. He proposes to repay his debt in 5...
Your friend wants to borrow money from you. He proposes to repay his debt in 5 monthly installments of $200, starting from month 4 (i.e., the first payment will occur at the end of month 4). If the monthly interest rate on your savings account is 1%, how much would you lend your friend at most? Round your result to the nearest cent, and do not use a $ sign (i.e., if the result is $1012.4671, enter it as 1012.47).
Mike has $235,000 he wishes to invest in two rental properties. One yields 10% and the...
Mike has $235,000 he wishes to invest in two rental properties. One yields 10% and the other yields 12%. For safety he wants to split his investment between the two properties instead of investing all of his money in the higher yielding rental property. If his goal is to achieve a total income earned of $25,000 a year from these two properties, how much money should he invest in each property. You must show your work illustrating how you calculated...
Mike has $235,000 he wishes to invest in two rental properties. One yields 10% and the...
Mike has $235,000 he wishes to invest in two rental properties. One yields 10% and the other yields 12%. For safety he wants to split his investment between the two properties instead of investing all of his money in the higher yielding rental property. If his goal is to achieve a total income earned of $25,00 a year from these two properties, how much money should he invest in each property. You must show your work illustrating how you calculated...
Your friend wants to borrow money from you. He proposes to repay his debt in 4...
Your friend wants to borrow money from you. He proposes to repay his debt in 4 monthly installments of $100, starting this month (i.e., the first payment will occur at the end of month 1). If the monthly interest rate on your savings account is 1.5%, how much would you lend your friend at most? Round your result to the nearest cent, and do not use a $ sign (i.e., if the result is $1012.4671, enter it as 1012.47)...
A rental property is for sale for $600,000. The property has a tenant with a 4...
A rental property is for sale for $600,000. The property has a tenant with a 4 year lease that pays the landlord $15,000 per month. The current relevant discount rate for this property is 6%. What is the Net Present Value (NPV) of the investment? Is this a good investment? Group of answer choices $23,719; Yes $120,00; Yes -$23,719; No -$548,023; No
1) Charles wants to relocate to Florida.  He decided to sell his rental property, which is located...
1) Charles wants to relocate to Florida.  He decided to sell his rental property, which is located in Brooklyn, NY. Charles accepted the following terms: Charles received $1,200,000 in cash and was relieved of $800,000 mortgage. (this was the outstanding balance at the time the transaction closed). Charles was responsible for broker's fees and legal costs associated with transferring the mortgage of $35,000 and $17,500, respectively.   Charles' adjusted basis in the rental property is $600,000. (The $600,000 is net of $750,000...
Scenario 1: Mrs. Rogers is considering purchasing a rental home property. The annual income from the...
Scenario 1: Mrs. Rogers is considering purchasing a rental home property. The annual income from the rental house is $26,400 and the annual expenses are $7,200 (both at the end of each year). Assume the house is to be sold at the end of 12 years for $255,000 and that the interest rate is 8% per year. (Note: for simplicity, ignore taxes and depreciation). What is the maximum Mrs. Rogers is willing to pay for the rental house today? Assume...
My friend Steve wants to buy something nice for himself. He doesn't know want he wants...
My friend Steve wants to buy something nice for himself. He doesn't know want he wants yet but he is thinking of spending $1,000 on it or more. He makes $500 a month and has a monthly living expense of $325. He also has a lot of bi-monthly subscription payments which costs him $450 every other month ($450 is the bimonthly expenses) . He wants to know when he will be able to buy want he wants and still be...
You are eating lunch at your favorite cafe and your friend calls and says he wants...
You are eating lunch at your favorite cafe and your friend calls and says he wants to meet you. He is calling from a city 135 miles away and wants to meet you somewhere between the two locations. He says he will start driving right away, but you need 27.0 minutes to finish your lunch before you can begin driving. If your friend plans to drive at 70.0 mph and you plan to drive at 50.0 mph, how long will...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT