What is the overall irr

Assignment Help Financial Management
Reference no: EM132577755

You are considering the acquisition of a 12,600 square foot industrial building that is fully leased for $0.31 per square foot per month. Market vacancy is 6% and operating expenses total $0.15 per square foot per month, $0.10 per square foot of which is paid by the tenant. Rent is contracted to increase at a rate of 2.5% annually, and operating expenses are anticipated to increase at the same rate.

The building is bank owned and the bank is asking $395,000. This appears to be an attractive price and competition to acquire the building is anticipated to be high, and may result in offers in excess of the asking price.

Your plan is to acquire the property, hold it for three years, and sell it at the end of year three. You estimate a terminal cap rate of 9.0% which will be applied to the fourth year's NOI to establish your sale price. Your discount rate is 11%.

1. What is the overall IRR?

Reference no: EM132577755

Questions Cloud

How much interest would be recorded for year ending december : Assuming 10% approximates the market rate of return, how much interest would be recorded for the year ending December 31 if the sale was made on June 30?
Cost-benefit analyzes play in evaluating these risk elements : What are risk elements; what process/s is/are used to find these risk elements; what role does a cost-benefit analyzes play in evaluating these risk elements?
Explain to the trader what protection delta : A trader's portfolio is delta neutral and has a gamma of -4,250. The delta and gamma of a particular traded call option
What amount should palmes report as prepaid expenses : In December 31, 2006 balance sheet, what amount should Palmes report as prepaid expenses? An opening balance at P6,000 for Palmes comprehensive insurance policy
What is the overall irr : You are considering the acquisition of a 12,600 square foot industrial building that is fully leased for $0.31 per square foot per month
Design a simple operational based circuit to solve problem : Design a simple operational based circuit to solve the problem. Construct and simulate the circuit you design in National instruments Multisim
What has your experience been with patient involvement : What has your experience been with patient involvement in treatment or healthcare decisions? In this Discussion, you will share your experiences and consider.
What the deposit in transit at the beginning of october is : What The deposit in transit at the beginning of October is? A deposit in October by Charm Company for P9, 000 was recorded by the bank in another account
What is the convexity of the bond : A 5 year bond with face value of $1000 (paid at maturity) and coupon rate 5% (coupon paid in arrears annually) has yield to maturity

Reviews

Write a Review

Financial Management Questions & Answers

  Proposed investment has an equipment cost

A proposed investment has an equipment cost of $1380800. The cost will be depreciated straight line to a zero salvage value over its 15 year life.

  The four-quadrant model

The four-quadrant model of DiPasquale and Wheaton (1992) has been used to describe the boom and bust cycle of real estate markets. Answer the following two questions: Draw the four-quadrant model and explain the segments of the real estate market cov..

  Computers is experiencing period of rapid growth

Turbo Technology Computers is experiencing a period of rapid growth. McCaffrey’s has 50,000 shares of stock outstanding.

  What is his annual rate of return on this stock

Will has been purchasing $25,000 worth of New Tek stock annually for the past 15 years. His holdings are now worth $598,100. What is his annual rate of return on this stock?

  What do you think are short and long-term objectives of ad

A retail store places an ad in the local newspaper for yoga wear. What do you think are the short- and long-term objectives of the ad?

  What do you expect the price of these bonds

Bond P is a premium bond with an 7.8 percent coupon, a YTM of 6.55 percent, and 15 years to maturity. Bond D is a discount bond with an 7.8 percent coupon, a YTM of 9.55 percent, and also 15 years to maturity. If interest rates remain unchanged, what..

  Kind of stock is most affected by changes in risk aversion

What kind of stock is most affected by changes in risk aversion. An annuity due pays $400 a year for 4 years, r=6%. What is its PV?

  Make the project acceptable to the company

What is the minimum probability of success that will make the project acceptable to the company?

  What would the result be if mattel chose to remain unhedged

What would the result be if Mattel chose to remain unhedged? Show how you arrived at your answer with numbers. Is this result certain or risky?

  What are some of the different responsibilities of a local

What are some of the different responsibilities of a local government's officers and its independent auditors when it comes to the financial report?

  Beta on the portfolio be after the purchase of alpha stock

What will the expected return and beta on the portfolio be after the purchase of the Alpha stock?

  What is value of firm according to mm with corporate taxes

The Hatfields Corporation is a zero growth firm with an expected EBIT of $250,000 and corporate tax rate of 40 percent. Hatfields uses $1,000,000 of debt financing, and the cost of equity to an unlevered firm in the same risk class is 15%. What is th..

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