Question

A real estate property is expected to be worth $10 million in 10 years. Its annual...

A real estate property is expected to be worth $10 million in 10 years. Its annual rental will just about cover operating costs. Alternative investment opportunities pay annual interest of 10%. What is the value of this real estate? If the real estate can be acquired for $2 million, what is the impact on wealth?

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Assume an FI originates a pool of short-term real estate loans worth $20 million with maturities...
Assume an FI originates a pool of short-term real estate loans worth $20 million with maturities of five years and paying interest rates of 9 percent (paid annually). The loans are amortized. a. What is the average payment received by the FI (both principal and interest) if no prepayment is expected over the life of the loans? b. If the loans are converted into real estate certificates and the FI charges a 50 basis points servicing fee (including insurance), what...
Lisa Conway worked as a real estate agent for Avis Reality for 12 years. Her annual...
Lisa Conway worked as a real estate agent for Avis Reality for 12 years. Her annual income is approximately $120,000 per year. Lisa is considering establishing her own real estate agency. She expects to generate revenues during the first year of $3 million. Salaries paid to her employees are expected to total $2 million. Operating expenses (i.e., rent, supplies, utility services) are expected to total $300,000. To begin the business, Lisa must borrow $550,000 from his bank at an interest...
You own a one-year European call option to buy one acre of Los Angeles real estate....
You own a one-year European call option to buy one acre of Los Angeles real estate. The exercise price is $2.07 million, and the current, appraised market value of the land is $1.77 million. The land is currently used as a parking lot, generating just enough money to cover real estate taxes. The annual standard deviation is 16% and the interest rate is 14%. How much is your call worth? Use the Black–Scholes formula. (Enter your answer in dollars not...
Part2 a. Mourezky gave some long-term real estate to a church. The property was worth $33,000...
Part2 a. Mourezky gave some long-term real estate to a church. The property was worth $33,000 and had a basis of $10,000.   Mourezky’s adjusted gross income was $60,000 and Mourezky made cash contributions of $9,000. How much is Mourezky’s charitable deduction? b. Casey made several contributions to Casey’s alma mater during the current year as follows: Cash                                                                                                             $ 4,200 A painting that Casey has owned five years for display in the library (basis, $1,280), FMV                                                                 9,500 Stock held for 10...
A real estate entrepreneur feels that the cash flow from a property will enable her to...
A real estate entrepreneur feels that the cash flow from a property will enable her to pay an investment firm $20,000 per year, at the end of every year, for eight years. How much should the group be willing to invest in her project if they require a 7.5% annual return (annually compounded, assuming the first of the eight equal payments arrives one year from the date the investment proceeds are disbursed)? A $87,860 B $110,696 C $137,282 D $117,146
Suppose that annual income from a rental property is expected to start at $1390 per year...
Suppose that annual income from a rental property is expected to start at $1390 per year and decrease at a uniform amount of $55 each year after the first year for the 16 year expected life of the property. The investment cost is $5200 and i is %10 per year. What is the present equivalent of the rental income? Assume that the investment occurs at time zero (now) and that the annual income is first received at the end of...
1-What should an investor pay for an investment property promising a $200,000 return after 10 years...
1-What should an investor pay for an investment property promising a $200,000 return after 10 years if a 7% annual return (compounded annually) on investment is projected? 2-Given the following information on a 30-year fixed-payment fully-amortizing loan, determine the remaining balance that the borrower has at the end of five years. Interest Rate: 4%, Monthly Payment: $3,000 3-An investor has an opportunity to invest in a rental property that will provide net cash returns of $2,000 per month for 10...
Property worth $98,000.00 can be purchased for 10% down and semi-annual mortgage payments of $3440.00 for...
Property worth $98,000.00 can be purchased for 10% down and semi-annual mortgage payments of $3440.00 for 20 years. What effective annual rate of interest is charged? The effective annual rate of interest is _____% (Round the final answer to two decimal places as needed. Round all intermediate values to six decimal places as needed.)
Mercer Corp. has 10 million shares outstanding and ​$103 million worth of debt outstanding. Its current...
Mercer Corp. has 10 million shares outstanding and ​$103 million worth of debt outstanding. Its current share price is $64. ​Mercer's equity cost of capital is 8.5%. Mercer has just announced that it will issue ​$383 million worth of debt. It will use the proceeds from this debt to pay off its existing​ debt, and use the remaining ​$280 million to pay an immediate dividend. Assume perfect capital markets. a. Estimate​ Mercer's share price just after the recapitalization is​ announced,...
You own a one-year European call option to buy one acre of Los Angeles real estate....
You own a one-year European call option to buy one acre of Los Angeles real estate. The exercise price is $2.19 million. Suppose the land is occupied by a warehouse generating rents of $245,000 after real estate taxes and all other out-of-pocket costs. The present value of the land plus the warehouse is $1.89 million. The annual standard deviation is 16% and the interest rate is 10%. How much is your call worth? (Enter your answer in dollars not in...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT