Your investment rule is to only buy triple net lease properties that offer a positive NPV...
Your investment rule is to only buy triple net lease properties that offer a positive NPV when the net operating income and sale of property is discounted back to the present at a 15% cost of capital. In other words, the discount rate you use in your calculations is 15%. Assume that you will pay the asking price. Your investment horizon is 15 years. At the end of 15 years you expect to sell the property for 30% more than you paid. Ignore taxes on capital gains.
The price is $5 million. NOI is $200,000 per year for 15 years.
You should invest in the following property?
True or False
Homework Answers
Add Answer to:
Your investment rule is to only buy triple net lease properties
that offer a positive NPV...
TRUE OR FALSE 1)A-Your investment rule is to only buy triple net lease properties that offer...
TRUE OR FALSE 1)A-Your investment rule is to only buy triple net lease properties that offer a positive NPV when the net operating income and sale of property is discounted back to the present at a 10% cost of capital. In other words, the discount rate you use in your calculations is 10%. Assume that you will pay the asking price. Your investment horizon is 15 years. At the end of 15 years you expect to sell the property for...
Your investment rule is to only buy triple net lease properties that offer a positive NPV...
Your investment rule is to only buy triple net lease properties that offer a positive NPV when the net operating income and sale of property is discounted back to the present at a 15% cost of capital. In other words, the discount rate you use in your calculations is 15%. Assume that you will pay the asking price. Your investment horizon is 15 years. At the end of 15 years you expect to sell the property for 30% more than...
Your investment rule is to only buy triple net lease properties that offer a positive NPV...
Your investment rule is to only buy triple net lease properties that offer a positive NPV when the net operating income and sale of property is discounted back to the present at a 10% cost of capital. In other words, the discount rate you use in your calculations is 10%. Assume that you will pay the asking price. Your investment horizon is 15 years. At the end of 15 years you expect to sell the property for 30% more than...
Understanding what the net present value (NPV) tells us. The NPV decision rule says to accept...
Understanding what the net present value (NPV) tells us. The NPV decision rule says to accept the project if the NPV is greater than zero. You perform a thorough capital budgeting analysis on a project that requires a $1,000,000,000 initial investment and calculate the net present value (NPV) as $1. Following the rule, you tell your boss she should accept the project. She laughs and says “do you think I would really invest $1,000,000,000 for a measly $1 NPV? You...
(3) Fill in the sheet titled “NPV-IRR”. Ann will buy the property in 2014, she will collect NOI f...
(3) Fill in the sheet titled “NPV-IRR”. Ann will buy the
property in 2014, she will collect NOI for 5 years 2015-2019, and
she will sell it in 2019.
Ann’s loan has a 5/4/3/2/1 prepayment penalty structure, so if
she prepays in the first year, she will pay a penalty equal to 5%
of the balance, in the second year she will pay a penalty equal to
4% of the balance etc.
Ann forecasts NOI will grow at 2% per...
Finacail cashflow, NPV, PV, etc. formulas
5. You have decided to invest in a small commercial office building that has one tenant. The tenant has a lease that calls for annual rent payments of $20,000 per year for the next 3 years. However, after that lease expires you expect to be able to increase the rent by 4% per year for the next 7 years. You plan to sell the building for $350,000 10 years from now.a. Create a table showing the projected cash flows for...
You have been offered a very long-term investment opportunity to increase your money one hundredfold. You...
You have been offered a very long-term investment opportunity to increase your money one hundredfold. You can invest $800 today and expect to receive $80,000 in 40 years. Your cost of capital for this (very risky) opportunity is 25%. What does the IRR rule say about whether the investment should be undertaken? What about the NPV rule? Do they agree? What is the IRR? The IRR of this investment opportunity is %. (Round to one decimal place.) What does the...
Your company needs a new corporate jet for 5 years. You can either buy or lease...
Your company needs a new corporate jet for 5 years. You can either buy or lease it. If you lease it, you need to make a lease payment at the beginning of each year. All prices are in $ million. A B 1 Price of jet 16 2 Resale value after 5 years 8 3 Annual lease payment 1.6 4 Number of lease payments 5 5 Interest rate 12% Part 1 What is the net advantage to leasing, i.e., the...
You have been offered a very long-term investment opportunity to increase your money one hundredfold. You...
You have been offered a very long-term investment opportunity to increase your money one hundredfold. You can invest $1,700 today and expect to receive $170,000 in 40 years. Your cost of capital for this (very risky) opportunity is 25%. What does the IRR rule say about whether the investment should be undertaken? What about the NPV rule? Do they agree? What is the IRR? The IRR of this investment opportunity is %. (Round to one decimal place.)
1. Using NPV approach, determine whether Tip Top Inc should lease or buy the new facility....
1. Using NPV approach, determine whether Tip Top Inc should
lease or buy the new facility. Assume that you will be making your
presentation before the company’s executive committee, and remember
that the president detests sloppy, disorganized reports.
2. What response will you give in the meeting if Tony brings up
the issue of the buildings future sales value?
Tip Top Canadian Inc owns a nationwide chain of supermarkets. The company plans to open another in Montreal, Quebec. In discussion...
(3) Fill in the sheet titled “NPV-IRR”. Ann will buy the
property in 2014, she will collect NOI for 5 years 2015-2019, and
she will sell it in 2019.
Ann’s loan has a 5/4/3/2/1 prepayment penalty structure, so if
she prepays in the first year, she will pay a penalty equal to 5%
of the balance, in the second year she will pay a penalty equal to
4% of the balance etc.
Ann forecasts NOI will grow at 2% per...
You have been offered a very long-term investment opportunity to increase your money one hundredfold. You can invest $800 today and expect to receive $80,000 in 40 years. Your cost of capital for this (very risky) opportunity is 25%. What does the IRR rule say about whether the investment should be undertaken? What about the NPV rule? Do they agree? What is the IRR? The IRR of this investment opportunity is %. (Round to one decimal place.) What does the...
You have been offered a very long-term investment opportunity to increase your money one hundredfold. You can invest $1,700 today and expect to receive $170,000 in 40 years. Your cost of capital for this (very risky) opportunity is 25%. What does the IRR rule say about whether the investment should be undertaken? What about the NPV rule? Do they agree? What is the IRR? The IRR of this investment opportunity is %. (Round to one decimal place.)
1. Using NPV approach, determine whether Tip Top Inc should
lease or buy the new facility. Assume that you will be making your
presentation before the company’s executive committee, and remember
that the president detests sloppy, disorganized reports.
2. What response will you give in the meeting if Tony brings up
the issue of the buildings future sales value?
Tip Top Canadian Inc owns a nationwide chain of supermarkets. The company plans to open another in Montreal, Quebec. In discussion...
Most questions answered within 3 hours.
-
Write the ionic equations for the first stage of salts
hydrolysis.
Anion, Cation?
Na2S
NiSO4
K2SO4...
asked 1 hour ago -
suppose there is a normally distributed population with a mean of
250 and a standard deviation...
asked 2 hours ago -
Question Three
Suppose you as project manager are using the Waterfall
development methodology on a large...
asked 3 hours ago -
Which statement is not true about welfare in Canada?
A.Benefits typically vary based on one's ability...
asked 3 hours ago -
Please help me with FLOWCHART and UML diagram for class,
thank you!
#include <iostream>
#include <fstream>...
asked 4 hours ago -
3. Describe the “logic circuit” of the Lac operon. Which
proteins are bound or not to...
asked 4 hours ago -
Ayesha’s adjusted gross income is $60,000 in 2019. She donated a
piece of artwork with a...
asked 4 hours ago -
For Dijkstra’s shortest path algorithm:
a. Give the Big-O time for Dijkstra’s shortest path algorithm
and...
asked 4 hours ago -
Phosphorus violates the 'octet rule' in biological molecules,
forming more covalent bonds than expected based on...
asked 4 hours ago -
A 1.3 eV electron has a 10-4 probability of tunneling
through a 2.4 eV potential barrier....
asked 5 hours ago -
What is the one ingredient that is common to being successful
with all stakeholders?
profit
trust...
asked 5 hours ago -
Write an assembly language 32 bit program that reads in lines of
text by a .txt...
asked 5 hours ago