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ree3043 exam 5 Questions and Solutions | Grade A+ $13.49   Add to cart

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ree3043 exam 5 Questions and Solutions | Grade A+

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Given the following information regarding an income producing property, determine the NPV using levered cash flows in your analysis: required equity investment: $270,000; expected NOI for each of the next five years: $150,000; debt service for each of the next five years: $125,000; expected h...

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  • June 11, 2024
  • 12
  • 2023/2024
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ree3043 exam 5 Questions and
Solutions | Grade A+


Given the following information regarding an income producing property, determine the

NPV using levered cash flows in your analysis: required equity investment: $270,000;

expected NOI for each of the next five years: $150,000; debt service for each of the next five

years: $125,000; expected holding period: five years; required yield on levered cash flows:

15%; expected sale price at end of year 5: $2,000,000; expected cost of sale: $125,000;

expected mortgage balance at time of sale: $1,500,000.




A.$245.15

B. $270,245.15

C. $419,264.54

D. $1,435,029.64


✔️: A




Determine the net present value (NPV) of an investment decision to purchase a property for

$90,000 that will generate annual cash flows of $10,000 per year for eight years and sell for

$80,000 at the end of the eight-year holding period, if the appropriate discount rate is 10%?

(Note: assume payments are made at end of year.)

, A. −$2,475

B. −$609

C. +$669.85

D. +$2,475


✔️: C




Given the following expected cash flow stream, determine the IRR of the proposed

investment in an income-producing property and determine whether or not the investment

should be pursued using IRR as your decision-making criteria: investment horizon: five

years; expected yearly cash flow in each of the next five years: $127,628; expected sale price

at end of five years: $1,595,350; required return on equity: 5%; current market price of

property: $1,750,000




A. IRR is 4.92%; decision is to invest.

b. IRR is 4.92%; decision is to not invest.

C. IRR is 5.72%; decision is to invest.

D. IRR is 5.72%; decision is to not invest.


✔️: C

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