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Your client, a real estate company, is evaluating a real estate project of $15,000,000 that will provide them with yearly NOI of $1,950,000 for the next 10 years and can then be resold for an amount estimated at $20,000,000. They can finance 70% of the purchase price through a 10-year mortgage with an amortization period of 25 years and an interest rate of 7%.
Your client will only proceed with the project if its returns are greater than his WACC or cost of equity. He provides you with the following information about his company:
Market value of equity $50,000,000Cost of equity 25%Market value of debt $75,000,000Cost of debt 10%Tax rate 30%
a) Calculate the unlevered NPV of this investmentb) Calculate the unlevered IRR of this investmentc) Calculate the levered NPVd) Calculate the levered IRR of this investment
Give examples of how a breakeven analysis is instrumental and what are the advantages and disadvantages of breakeven analysis?
Jenny prepares her own income tax return each year. A tax preparer would charge her $220 for this service. Over a period of 10 years, how much does Elaine gain from preparing her own tax return? Assume she can earn 7 percent on her savings.
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How do you separate the individual aspects of the successful partnership pyramid into inputs and outputs and explain why each aspect of the pyramid is an input
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In perfect capital markets the cost of equity increases as more debt is issued, but the weighted-average cost of capital remains unchanged.
The administrative costs of obtaining the line of credit are $500, and the interest payments are expected to be $1,000 per month. The new restaurant will occupy an existing building that can be rented for $2,500 per month. The incremental cash flo..
Describe in a short article the role of Social responsibility in research consisting 3-4 references and examples from finance.
Assume that in 2018, a copper penny struck at the Philadelphia mint in 1795 was sold for $405,000. What was the rate of return on this investment?
Erika deposited $200 monthly in a fund earning j12 = 12%.The first deposit was made on June 1, 1990 and the last deposit on November 1, 2000.
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