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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
Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..
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