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Alina [70]
3 years ago
9

A property that produces a first year NOI of $80,000 is purchased for $750,000. The NOI is expected stay constant through year 5

, and to increase by 15% in the sixth year when some of the leases turn over. The NOI would then stay constant in years 6-10. The resale price in year 10 is expected to be $830,000. What is the net present value of investing in this property based on the 10-year holding period and a required return of 9.5%
Business
1 answer:
PIT_PIT [208]3 years ago
4 0

Answer: $115998

Explanation:

Based on the information given, we can calculate the NOI from the 6th year which will be:

= $80,000 × (100% + 15%)

= $80,000 × 115%

= $80,000 × 1.15

= $92,000

Therefore, the net present value of the property based on the 10-year holding period and a discount rate of 9.5% will be:

= 80000(PVAF, 5 year) + 92000[PVAF,(10-5),9.5%] + 830000/(1.095)10-750000

= (80000 × 3.839) + (92000 × 2.439) + (830000 × 0.403) - 750000

= 307120 + 224388 + 334490 - 750000

= 865998 - 750000

= $115998

Therefore, the net present value is $115998

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Answer:

7.56%

Explanation:

Calculation for the required return for Smiling Elephant

Using this formula

Required return =D/P0

Where,

D=$6.10

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Let plug in the formula

Required return =$6.10/$80.65

Required return =0.0756×100

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3 years ago
The accounting cycle starts with a.closing out the periodic accounts. b.recording the transaction based on the information in a
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letter b, recording the transaction based on the information in a source document

Explanation:

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6 0
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Why must the eliminating entries be entered in the consolidation worksheet each time consolidated statements are prepared?
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This basically thus, requires the elimination of all the assets and liabilities of the subsidiary, and creation of such assets and liabilities into the balances of the holding(parent) company. In this manner the elimination is necessary to record.

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8 0
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Rivera Company manufactured two products, A and B, during April. For purposes of product costing, an overhead rate of $2.00 per
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Solution :

a). The assigned total cost is :

$A =\$ \ 8000$

$B =\$ \ 24,000$

Total overheads                                 $ 500,000

Total hours                                             250,000

Plantwide overhead rate                        $ 2

Cost assigned to :

A ( 2 x 4 x 1000)                                   $ 8,000

B ( 2 x 4 x 3000)                                  $ 24,000

b).                                                      Department 1         Department 2

Overheads                                       $ 300,000                 $ 200,000

Hours                                                   200,000                       50,000

Overhead rate                                 $ 1.50                           $ 4.00

Overheads for the product A                        $ 8,500

  (1.5 x 3 + 4 x 1) x 1000

Overheads for the product B                        $ 40,500

  (1.5 x 3 + 4 x 1) x 3000

c).                                                          Plant wide          Departmental

material and labor                                  $ 10                        $ 10

overheads                                               $ 8                         $ 13.50

Total                                                         $ 18.00                  $ 23.50

Add: profit                                                $ 7.20                    $ 9.40

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Answer:

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5 0
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