Exam (elaborations)

REE3043 Exam 5 Questions with Complete Solutions Already Passed

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REE3043

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REE3043

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Uploaded on September 13, 2024
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ree3043

Institution REE3043
Course REE3043

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REE3043 Exam 5 Questions with

Complete Solutions Already Passed

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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Exam (elaborations)

REE3043 Exam 5 Questions with Complete Solutions Already Passed

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