User Account

All Pages

Estimate of the value of the office

Assignment Help Finance Basics
Reference no: EM132510025

This year, an office building has an EBIT of $1,000,000. The corporate tax rate is 0.35. You are considering buying the building using 80% of debt and the rest in equity. The unlevered beta of office REITs is 0.4 and the average D/E in the sector is 0.5. Long term bonds yield 2%, the expected inflation is 1%. Assume a risk premium of 4%. Assume a cost of debt of 3%.

-What is the cost of equity in the investment, the WACC and the capitalization rate (assuming g=inflation)?

-What is your estimate of the value of the office?

Reference no: EM132510025

Questions Cloud

Determining the federal reserve board : Now suppose that the Federal Reserve Board increases the money supply, caus- ing a fall in the risk-free rate to 9% and in rM to 12%.
Compare the pe ratio for nike with the industry average : Compare the P/E ratio for NIKE with the industry average or 5-year average. Is the stock overvalued, undervalued, or properly valued? Why?
What is the current price of a contrarian bond : The current market rate of interest for this type of speculative debt remains at 18 percent. What is the current price of a Contrarian bond?
Analysis to show the company should retain printer : Analysis to show whether the company should retain or replace the printer. (If an amount reduces the net income then enter with a negative sign)
Estimate of the value of the office : This year, an office building has an EBIT of $1,000,000. The corporate tax rate is 0.35. You are considering buying the building using 80% of debt
Calculate the ending inventory and cost of goods : Summary of the beginning inventory and purchases. Calculate the ending inventory and cost of goods sold using the weighted-average method.
Corporate bond with no call or convertibility provision : A AA default rated municipal bond with no call provision is yielding 5 percent. A AA default rated corporate bond with no call or convertibility provision is yi
Pension funds common in the united states : What are the two types of pension funds common in the United States? What is good about these pension funds.
Analysis the company should make or buy the switches : An incremental analysis showing whether the company should make or buy the switches. (Round per unit answers to 2 decimal places, e.g. 15.25)

Reviews

Write a Review

Finance Basics Questions & Answers

  What was your percentage return

How much of that is attributed to the dividend and how much is attributed to the capital gain?

  Government issued t-bills and munis

Government issued T-bills and munis. Would you invest in government issued T-bills? Why or why not? Are there specific munis you would or would not invest in? What factors affect your choices? Write your analysis of the current status of gover..

  Write a complaint letter to a business owner

Be sure to use a credible tone and specifi c examples to persuade the owner that your experience is valid. Also find a way to encourage a response from the company. You may ask for reasonable compensation, if appropriate.

  An additional 24000 into a savings account how much will

you expect to deposit 55000 today and then in 2 years to deposit an additional 24000 into a savings account. how much

  Calculate the expected return of a portfolio

Calculate the expected return of a portfolio that is composed of 36 percent Stock A and 64 percent Stock B when the correlation between the returns

  Obtain current dividend yield for canadian corporations

From published financial information, obtain the current dividend yield for various Canadian corporations. How do you explain the differences?

  What are the major sources of funds for commercial banks

What are the major sources of funds for commercial banks in the United States? What are the major uses of funds for commercial banks in the United States? For each of your answers, specify where the item appears on the balance sheet of a typical c..

  Calculating financial ratios

Just Dew It Corporation reports the following balance sheet data for 2004 and 2005. Based on the given balance sheets, calculate the following financial ratios for every year. Negative amount should be indicated by a minus sign.

  Internal and external business growth

Define and distinguish between internal and external business growth and Summarize the reasons why a business might seek to pursue external.

  Objective of an industry self regulatory organization

What is the objective of an industry self-regulatory organization? Compare and contrast three types of futures trading costs?

  Calculate the cash flow at maturity

The par value is $1,000 and the coupon payment is stated as 75% of the equity index return or zero. Calculate the cash flow at maturity assuming the equity index appreciates by 30% over this five-year period

  Should the company undertake the investment

Should the company undertake the investment? If so, should it purchase or lease the plant?

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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