Question

A building with a purchase price of $15,000,000 is expected to generate an NOI of $1,250,000...

A building with a purchase price of $15,000,000 is expected to generate an NOI of $1,250,000 for each of the next five years and can be resold at the end of the fifth year for $17,000,000. The purchase will be financed by a $10,000,000 interest only loan with yearly payments of $500,000. If the investor has a WACC of 8% and a required equity return of 15%, what is the levered NPV?

a. $2,758,615

b. $540,409

c. $994,353

d. $5,750,000

e. $2,405,720

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Option A. $2,758,615

Please upvote

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
A building with a purchase price of $20,000,000 is expected to generate an NOI of $1,750,000...
A building with a purchase price of $20,000,000 is expected to generate an NOI of $1,750,000 for each of the next five years and can be resold at the end of the fifth year for $21,000,000. The purchase will be financed by a $12,000,000 interest only loan with yearly payments of $720,000. What is the levered IRR of the investment? a. 14.2% b. 11.7% c. 13.9% d. 12.8% e. 14.7%
Question 2 A property is expected to generate $300,000 of NOI over the next 12 months....
Question 2 A property is expected to generate $300,000 of NOI over the next 12 months. Discussion with lenders leads to the conclusion that the minimum acceptable debt-coverage ratio will be 1.20 and that loan terms will be 8% per annum, with 20-year amortization (monthly payments). A. What is the maximum supportable annual debt service? Solve 3 ways: - the PV or PMT functions on Google Sheets - your HP 12c (tell me which keys you used) -the Mortgage Constant...
Your company is considering purchasing a new building as part of an expansion plan. The building...
Your company is considering purchasing a new building as part of an expansion plan. The building cost is $1.5 million. Instead of paying cash for the building out of the business, you plan to borrow $500,000 from your bank via a commercial loan, at a rate of 4.5%. The balance of the building cost will be pulled from your personal investment account, which has averaged only a 1% return the past eight years. The company will pay your personal loan...
Assume that an industrial building can be purchased for $1,700,000 today, is expected to yield cash...
Assume that an industrial building can be purchased for $1,700,000 today, is expected to yield cash flows of $125,000 for each of the next five years (with the cash flows occurring at the end of each year), and can be sold at the end of the fifth year for $1,625,000. Calculate the internal rate of return (IRR) for this transaction. A) 3.14% B) 6.58 C) 9.20% D) 10.37% 19) For Question #18, assume you don’t know what the purchase price...
ONLY COMPLETE USING EXCEL SHOWING WORK - THANK YOU! You are considering the purchase of a...
ONLY COMPLETE USING EXCEL SHOWING WORK - THANK YOU! You are considering the purchase of a quadruplex apartment building. Effective gross income during the first year of operations is expected to be $33,600 ($700 per month per unit). First-year operating expenses are expected to be $13,440 (at 40 percent of EGI). Ignore capital expenditures. The purchase price of the quadruplex is $200,000. The acquisition will be financed with $60,000 in equity and a $140,000 standard fixed-rate mortgage. The interest rate...
Santa Clara Electronics, Inc. of California currently exports 1,000,000 electric switches per year to the Argentina...
Santa Clara Electronics, Inc. of California currently exports 1,000,000 electric switches per year to the Argentina under an import agreement that expires in five years. In the Argentina, the imported switches are currently sold for peso equivalent of $75 per set. Santa Clara’s costs, including shipping, are $50 per set, and its current pre-tax profit is $25 per set. Similar costs and prices would occur in Argentine production. The market for this type of switch in the Argentina is stable...
Jones Manufacturing Co. produces personal fitness machines. After five years, the once successful line is no...
Jones Manufacturing Co. produces personal fitness machines. After five years, the once successful line is no longer selling well, so the company is considering production of an improved line of machines incorporating new computer technology. This can be done by buying needed production equipment. There is a six-month manufacturing, delivery, setup, and training delay before the equipment will be ready for production. The company wants to start producing the new line of fitness machines in January next year. Two options...
Jones Manufacturing Co. produces personal fitness machines. After five years, the once successful line is no...
Jones Manufacturing Co. produces personal fitness machines. After five years, the once successful line is no longer selling well, so the company is considering production of an improved line of machines incorporating new computer technology. This can be done by buying needed production equipment. There is a six-month manufacturing, delivery, setup, and training delay before the equipment will be ready for production. The company wants to start producing the new line of fitness machines in January next year. Two options...
Use the following information on Company Y and perform pro-forma financial modeling using a planned expansion...
Use the following information on Company Y and perform pro-forma financial modeling using a planned expansion method to answers question (1) and (2). To do this assume that the percentage values with respect to sales of the (i) costs except depreciation, (ii) cash and equivalents, (iii) accounts receivable, (iv) inventories, and (v) accounts payable will stay fixed at the values corresponding for 2016. Assume also that income tax will remain at 35% of the Pretax Income. Consider Company Y. This...
1. One advantage of Adjustable Rate Mortgages (ARM) is that a. lenders face lower levels of...
1. One advantage of Adjustable Rate Mortgages (ARM) is that a. lenders face lower levels of interest rate risk than a fixed rate mortgage. b. the outstanding loan balance can be adjusted regularly. c. the default risk of borrowers is lower than under a fixed rate mortgage. d. All of the above. 2. Gilbert takes out a 23-year adjustable rate mortgage loan for $6,000,000 with monthly payments. The first two years of the loan have a “teaser” rate of 2%,...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT