Estimate is based on forecasted net rent

Assignment Help Financial Management
Reference no: EM13847234

A building is appraised at $1 million. This estimate is based on forecasted net rent of $100,000 per year discounted at a 10% cost of capital [PV = 100,000/ 0.1 = 1,000,000]. The rent is the net of repair and maintenance costs and taxes. Suppose the building is currently uninhabitable. It will take one year and $250,000 of work (spent at the end of the year) to bring it into rentable condition. How much would you be willing to pay for the building today? Explain your calculations. Respond to at least two of your classmates’ posts.   

Reference no: EM13847234

Questions Cloud

Case analysis:degree appraisals case study : Case Analysis: 360 Degree Appraisals Case Study
Interpret the results in one page memo to management : Image Storage Corporation has 1,000,000 shares outstanding. It wishes to issue 500,000 new shares using a (North American) rights issue. If the current stock price is $50 and the subscription price is $47/share, calculate the value of a right. Based ..
Who is proposing the legislation : Review new/pending 2014-2015 State or Local legislation for health care finance component to include: who is proposing the legislation and Whenwas it proposed/enacted
The efficient-market hypothesis : “If the efficient-market hypothesis is true, the pension fund manager might as well select a portfolio with a pin.” Explain why or why not this is true.
Estimate is based on forecasted net rent : A building is appraised at $1 million. This estimate is based on forecasted net rent of $100,000 per year discounted at a 10% cost of capital [PV = 100,000/ 0.1 = 1,000,000]. The rent is the net of repair and maintenance costs and taxes. How much wou..
How much should he set aside today for purchase : Fred plans to purchase a car four years from now. The car will cost $57,325 at that time. Assume that fred can earn 8.56 percent compounded monthly on his money. How much should he set aside today for the purchase?
Savings account today that earns an annual interest rate : You placed $3722 in a savings account today that earns an annual interest rate of 19.72 percent compounded semi annually. How much will you have in this account at the end of five years? Assume that all interest received at the end of the period is r..
What is value of the common stock-common stock valuation : (Common stock valuation) Gilliand Motor, Inc., paid a $4.39 dividend last year. If Gilliand’s return on equity is 19 percent, and its retention rate is 28 percent, what is the value of the common stock if the investors require a rate of return of 18 ..
Explain combination of ways to educate co-workers : What would be the best way or combination of ways to educate co-workers about the new business your (imaginary) company just acquired

Reviews

Write a Review

Financial Management Questions & Answers

  Assets decrease and owners equity decreases

On July 1, 2012, Watson Company received a $20,000 promissory note for services from Jeffs Company. The annual interest rate is 5%. Principal and interest are paid in cash at the maturity date of June 30, 2013. Assets decrease and owners' equity decr..

  Effective annual cost of the least expensive type of credit

Yonge Corporation must arrange financing for its working capital requirements for the coming year. Yonge can: (a) borrow from its bank on a simple interest basis (interest payable at the end of the loan) for 1 year at a 12% nominal rate; What is the ..

  What is net interest margin ratio-required reserves ratio

A depository institution holds $190 million in required reserves and $24 million in excess reserves.   Its remaining assets include $576 million in loans and $310 million in securities. Equity is $100 million. If the institution’s only liabilities ar..

  Assume that you have been asked to place a value on the

assume that you have been asked to place a value on the fund capital equity of besthealth a not-for-profit hmo. its

  Profitability index

A project has an initial cost of $62,575, expected net cash inflows of $13,000 per year for 9 years, and a cost of capital of 13%. What is the project's PI? Do not round your intermediate calculations. Round your answer to two decimal places.

  What are the market value weights of debt and equity

Titan Mining Corporation has 9.5 million shares of common stock outstanding and 390,000 5 percent semi-annual bonds outstanding, par value $1,000 each. The common stock currently sells for $43 per share and has a beta of 1.25, and the bonds have 15 y..

  What is the total present value assuming opportunity cost

What is the total present value of $1,000 received at the end of year 1, $1,200 received at the end of year 2, and $1,300 received at the end of year 3, assuming an opportunity cost of 7 percent?

  Framework for pursuing synergy

Financial management provides a framework for pursuing synergy between the functional responsibilities and financial resources of the business organisation.

  Assume interest payments are semi-annual

Calculate the price of a 5.8 percent coupon bond with 10 years left to maturity and a market interest rate of 7.0 percent. (Assume interest payments are semi-annual.)

  About the time value of money

You just started working full-time, earning $100,000 per year. Your goal is to have $5 million in your 401(k) plan by your 61st birthday (i.e., 40 years from today). Assume 3% inflation per year.

  Business trip to europe and want to convert to euros

You plan to take a business trip to Europe and want to convert $2,000 to Euros. The U.S. bank quote for the Euro is $1.3853-1.3888, meaning the bank will buy Euros at $1.3853 and sell Euros at $1.3888. Calculate the amount of Euros you will receive f..

  Conduct a complete bond refunding analysis

Schumann Shoe Manufacturer is considering whether or not to refund a $70 million, 10% coupon, 30-year bond issue that was sold 8 years ago. It is amortizing $4.5 million of flotation costs on the 10% bonds over the issues 30-year life. Conduct a comp..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd