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1. You pay $1m for a property with 9% cap rate, keep it for 5 years, and sell at the end of year 5 at the same cap rate. The selling costs are 5% of the price. What is your IRR? Enter your answer in percent, but without percent sign.
2. You are doing the same as above but instead of paying cash, you take a 70% LTV IO loan at 5% annual rate. What is your IRR?
3. In addition to the loan above you take a mezzanine IO loan of $200k at 8% annual rate. What is your IRR? The neighborhood is declining, so your selling cap rate is 11% in questions 10-13. You have limited liability: you can walk away anytime. If you walk away in year t, all cash flows starting year t become zero (including year t).
4. You pay cash as in Question 1 above. What is your IRR?
5. You take the loan as in Question 2 above. What is your IRR?
6. You take an additional mezzanine loan as in Question 3 above. What is your IRR?
Fair-to-Midland Manufacturing, Inc. (FMM), has applied for a loan at True Credit Bank. Jon Fulkerson, the credit analyst at the bank
A. Give an example of a risk that is clearly a diversifiable risk and one that is clearly a non-diversifiable risk.
Nixon Communications is trying to estimate the first-year operating cash flow (at t = 1) for a proposed project. The financial staff has collected the following information: The company faces a 40 percent tax rate. What is the project's operating cas..
In perfect capital markets the cost of equity increases as more debt is issued, but the weighted-average cost of capital remains unchanged.
If a bank pays a 4,50% nominal rate with monthly compounding on deposits, what effective annual rate does the bank pay?
You have gathered the following information for Frosty Ale, Inc., which has a 40 percent marginal tax rate.
Your firm, Martin Industries, has experienced a higher than expected demand for its product line. The firm plans to expand its operation by 25% by spending $5,000,000 for an additional building.
you have an outstanding bond for 1000 par value and they matuer in 5 years. their yeild to maturity is 9 based on
ABC has book debt of 100. It's debt currently trades at 150. It has book equity of 200. It has 100 shares outstanding, each of which trades at 2.5.
your non-profit agency has been given 20000 to spend on health initiatives in the developing world. you must spend the
Investment bankers haave advised General Bill that flotation costs on the new preferred issue would be 5% of the selling price. The General's marginal tax rate is 30%. What is the relevant cost of new preffered stock?
Shanos Inc. would like to finance an experimental cost-saving procedure by issuing new common stock. The corporations existing common stock currently.
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