Reference no: EM131211799
Assume that you are an investment analyst preparing an analysis of an investment opportunity for a client. Your client is considering the acquisition of an apartment complex from a developer at the point in time when the apartments are ready for first occupancy. Your have developed the following information.
1) Number of units = 36
2) First year market rent per unit = $450 per month
3) Rent is projected to increase by 8% each year
4) Annual vacancy rate = 3% of PGI(Potential Gross Income)
5) Annual collection loss = 2% of PGI(Potential Gross Income)
6) Annual operating expense = 35% of EGI(Effective Gross Income)
7) Miscellaneous yearly income (parking and washers/dryers) = $800
8) Monthly miscellaneous income is expected to remain constant
9) Purchase price = $2,000,000
10) Estimated value of land = $500,000
11) Anticipated mortgage terms:
a) Loan to value ratio = .80
b) Interest rate = 6%
c) Years to maturity = 25
d) Points charged = 3
e) Prepayment penalty = 2% of outstanding balance
f) Level payment, fully amortized
g) Fixed interest rate, annual payments
12) Anticipated holding period = 4 years
13) Proportion by which property is expected to appreciate during the holding period -- 5% a year
14) Estimated selling expenses as proportion of future sales price = 5%
15) Marginal income tax rate for the client = 28%
16) It is assumed that the property is put into service on January 1st and sold on December 31st
17) Assume the client is "active" in the property management
18) It is assumed that the client has an adjusted gross income of $95,000 and has no other passive income not offset by other passive losses (for each year of the anticipated holding period)
19) Client's minimum required after tax rate of return on equity = 11%
Calculate:
a. The before-tax and after-tax cash flows for each year of the holding period and the before-tax and after-tax equity reversion.
b. For the first year of operation the:
(1) Overall (cap) rate of return
(2) Equity dividend rate
(3) Gross income multiplier
(4) Debt coverage ratio
c. The after-tax net present value and the after-tax internal rate of return.
d. Is this an investment that should be considered? Explain.
|
Separate transactions using perpetual inventory system
: Allied Parts was organized on May 1, 2015, and made its first purchase of merchandise on May 3. The purchase was for 2,000 units at a price of $9 per unit. On May 5, Allied Parts sold 1,200 of the units for $13 per unit to Baker Co. Terms of the sale..
|
|
Draw inferences about the visual rhetoric techniques used
: Study print advertisements for one type of product (e.g., cars, cosmetics, cigarettes, alcohol, food) to draw inferences about the visual rhetoric techniques used to sell that product.
|
|
How do individuals acquire and develop language
: How do individuals acquire and develop language? How do you personally communicate your thoughts and how did you learn to do so? Based on your own experiences, what are some symbols people use to communicate?
|
|
Companies are required to assign each category of securities
: De?ne each of these categories of securities and discuss the accounting treatment for each category. Discuss how companies are required to assign each category of securities into its current and noncurrent portions.
|
|
After-tax net present value and the after-tax internal rate
: Assume that you are an investment analyst preparing an analysis of an investment opportunity for a client. Your client is considering the acquisition of an apartment complex from a developer at the point in time when the apartments are ready for firs..
|
|
Overhead cost would be included in company flexible budget
: Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: What raw materials cost would be included in the company’s flexible b..
|
|
Show that these operations on vectors can be implemented
: The assembly-language instructions of Fig. 3.18 operate on integers. Show that the operations AND, OR, and NOT can be realized on Boolean variables with these instructions. Show also that these operations on vectors can be implemented.
|
|
Summarize what you learned about history and economics
: Write a paper in which summarize what you learned about HISTORY and ECONOMICS of the age, and then about the elective arts;
|
|
How management might manage earnings using current cost data
: The argument among accountants and ?nancial statement users over the proper valuation procedures for assets and liabilities resulted in the release of SFAS No. 115. How might the use of current values in the accounting records cause earn-ings volatil..
|