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Alina [70]
2 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]2 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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1 year ago
True or False: Food Corp., a business with its headquarters and major operations in the United States of America, also has an of
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2 years ago
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2 years ago
On january 6, 2014, the eldorado corporation purchased a tract of land for a factory site for $500,000. an existing building on
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3 years ago
Zack has two savings accounts with a total of $9,000. he withdrew 10% from one and 60% from the other to buy his girlfriend an e
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Let x = the balance in the first account.
Let y = the balance in the second account.

The total amount in the two accounts is $9,000, therefore
x + y = 9000                      (1)

Zack withdraws 10% of x and 60% of y for a total of $2,175.
Therefore
0.1x + 0.6y = 2175
or
x + 6y = 21750                   (2)

Subtract (1) from (2).
x + 6y - (x + y) = 21750 - 9000
5y = 12750
y = 2550
From (1), obtain
x = 9000 - 2550 = 6450

The balance in the first account is
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The remaining balance in the second account is
0.4*y = 0.4*2550 = $1,020

Answer:
The balance in the first account is $5,805
The balance in the second account is $1,020

8 0
3 years ago
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