Question

You are an employee of University Investment Consultants, Ltd. and have been given the following assignment. You are to present an investment analysis of a new small residential income producing property for sale to a potential investor. The asking price for the property is $1,250,000; rents are estimated at $200,000 during the first year and are expected to grow at 3 percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A 70 percent loan can be obtained at 11 percent interest for 30 years. The property is expected to appreciate in value at 3 percent per year and is expected to be owned for five years and then sold.a. What is the investor's expected before-tax internal rate of return on equity invested (BTIRR)? b. What is the first-year debt coverage ratio? c. What is the terminal capitalization rate? d. What is the NPV using a 14 percent discount rate? What does this mean? e. What is the profitability index using a 14 percent discount rate? What does this mean?

Answer 1

Answer:Answer and Explanation:

At the begining we have to calculate loan instalment.

Capital Installment = Loan/360 (12 month * 30 years)

Interest Installment = Balance from...

Explanation:Eliminating entries (including goodwill impairment) and worksheets for various years on january 1, 2013, porter company purchased an 80% interest in the capital stock of salem company for$850,000. at that time, salem company had capital stock of $550,000 and retained earnings of $80,000.differences between the fair value and the book value of the identifiable assets of salem company were asfollows: fair value in excess of book valueequipment$130,000land65,000inv entory40,000the book values of all other assets and liabilities of salem company were equal to their fair values onjanuary 1, 2013. the equipment had a remaining life of five years on january 1, 2013. the inventory was sold in2013.salem company’s net income and dividends declared in 2013 and 2014 were as follows: year 2013 net income of $100,000; dividends declared of $25,000year 2014 net income of $110,000; dividends declared of $35,000required: a. prepare a computation and allocation schedule for the difference between book value of equity acquired andthe value implied by the purchase price. b.present the eliminating/adjusting entries needed on the consolidated worksheet