How much should the developer be willing to pay

Assignment Help Accounting Basics
Reference no: EM133061018

Question - A developer plans to start construction of a building in one year if at that point rent levels make construction feasible. At that time the building will cost $1,100,000 to construct. During the first year after construction would take place, there is a 60 percent chance that NOI will be $157,500 and a 40 percent chance that the NOI will be $79,000. In either case, NOI would be expected to increase at 2 percent per year after the first year.

Required - How much should the developer be willing to pay for the land if he wants a 12 percent rate of return?

Reference no: EM133061018

Questions Cloud

What is the present value of cash flows : You are valuing a firm that is expected to earn cash flows that grow at 10% for the first five years and at 5% in perpetuity thereafter. The forecasted cash flo
What is the retained earning balance at december : At the beginning of 2019, ABC Corporation had retained earnings of P3,000,000. What is the retained earning balance at December
Find out payback period method : Stellar Inc. has two projects as follows: A -2,400 800 1,150 1,000 1,850 B -2,950 700 1,450 1,000 3,850 If Stellar set 2.49 years as a cut-off period for screen
What is yield to? maturity : Abner? Corporation's bonds mature in 21 years and pay 15 percent interest annually. If you purchase the bonds for ?$925?, what is your yield to? maturity?
How much should the developer be willing to pay : In either case, NOI would be expected to increase at 2 percent per year after the first year. How much should the developer be willing to pay
Calculate the cost of capital : A firm has a capital structure which is composed of 50% debt and 50% equity. If the debt rate is 9.77% and the rate of return on equity is 12.65%
Rate of return on portfolio : You established a portfolio consisting of 150 shares of stock in the long position; 400 puts in the long position with a strike price of $100; and 500 calls in
Sources of finance for fintech companies in uk : What are the appropriate sources of finance for fintech companies In UK
What is the effective rate of interest : Makkari Inc. also keeps a minimum transaction balance of P20,000. What is the effective rate of interest

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

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