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You are considering buying or renting a property. You can rent it for $4,000 per month. The owner is responsible for all maintenance, property insurance and taxes. You can also buy the property for $450,000 and finance it with an 80% mortgage at 4.50% over 30 years. Properties have historically appreciated at 3.1% per annum. Rents increase at 3.25 percent. Maintenance and insurance is $1,500 per year but increase at 2.8%. You are in a 26% tax bracket. You plan on holding the property for 4 years and if sold, it would qualify for capital gains exclusion. Selling costs are 8 percent and property taxes are 2% each year.
What is the property value in years 4 and 5?
What is the loan balance in years 4 and 5?
If you sell in Year 4, what is the after-tax cashflow and the IRR?
If you sell in Year 5, what is the after-tax cashflow and IRR?
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Smith and Weston has 55,000 shares of common stock outstanding at a price of $31 a share. It also has 3,000 shares of preferred stock outstanding at a price of $62 a share. The firm has 8 percent, 12-year bonds outstanding with a total face value of ..
The firm has recently gotten into some trouble and the rating agency is downgrading the bonds to BB. The new appropriate discount rate will be 8.7 percent.
Sally McKrachen is a single young professional with a gross income of $51,000. Sally has no adjustments to gross income, but she does have itemized deductions totaling $4,275. If personal exemptions for the year are $3,700 each and the standard deduc..
Allocate the joint costs using relative weight. With these costs, what is the profit or loss associated with Copper?
What is the value of a European call option if the underlying stock price is $131, the strike price is $120, the underlying stock volatility is 42 percent, and
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Determine the present value of each year's payment for each proposal, as well as the total present value of each proposal.
How could Blades use accounts receivable financing or factoring, considering that it does not currently have accounts receivable in Thailand? If Blades uses a Thai bank to obtain this financing, how do you think the fact that Blades does not have rec..
A company borrows $75,000 for 5 years. The company makes quarterly interest payments to the lender of $2,250. (12% simple interest). The company makes quarterly deposits of $3,324.03 to a sinking fund which earns 5% compounded quarterly. State the eq..
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