What is wrong with the following statement: Property X is worth $10 million in the market...
What is wrong with the following statement: Property X is worth $10 million in the market today because it produces $1 million of annual net income, and cap rates in the relevant property asset market are currently 10 percent.
Homework Answers
| Answer: Nothing is wrong with the statement, as the worth of |
| Property X should be the PV of the expected cash flows when |
| discounted at the appropriate market rate. |
| Hence, worth of Property X = $1 million/10% = $10 million |
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What is wrong with the following statement: Property X is worth
$10 million in the market...
1. XYZ Manufacturers plans to repurchase $10 million worth of common stock with borrowed funds. The...
1. XYZ Manufacturers plans to repurchase $10 million worth of common stock with borrowed funds. The following information is provided: Repurchase price = $25 Net income after tax = $120 million EPS before repurchase = $1.5 Given that the company finances the repurchase by borrowing at an after-tax interest rate of 13.5%, what is the EPS after the repurchase? 2. MID Co. has 10 million shares outstanding and each share is currently worth $50. The company made $35 million in...
A) The capitalization rate, “cap rate” measures the annual net operating income of a commercial property...
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Banking Management
A bank has an average asset duration of 6 years and an average liability duration of 2 years. This bank has total assets of $ 457 million and total liabilities of $347 million. Currently, market interest rates are 10 percent. If interest rate falls by 2 percent, this bank's change in net worth is $______________ million.
The Closed Fund is a closed-end investment company with a portfolio currently worth $180 million. It...
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Two companies, A and B, decide to acquire asset worth $15 million. Company A decides to...
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Please answer the following questions. I put -9.20%, but it says it's wrong. Suppose First National...
Please answer the following questions.
I put -9.20%, but it says it's wrong.
Suppose First National Bank holds $100 million in assets with an average duration of 4 years, and it holds $85 million in liabilities with an average duration of 2 years Further suppose there is a 4-percentage-point increase in interest rates. Calculate the percentage decrease in First National Bank's net worth relative to the total original asset value A 4 percentage point increase in interest rates decreases First...
Kimbo Widgets Inc. purchased new cloaking machinery five years ago for $10 million. The machinery can...
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MID Co. has 10 million shares outstanding and each share is currently worth $50. The company...
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An Fl has purchased a $209 million cap of 10 percent at a premium of 0.70...
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Please answer the following questions.
I put -9.20%, but it says it's wrong.
Suppose First National Bank holds $100 million in assets with an average duration of 4 years, and it holds $85 million in liabilities with an average duration of 2 years Further suppose there is a 4-percentage-point increase in interest rates. Calculate the percentage decrease in First National Bank's net worth relative to the total original asset value A 4 percentage point increase in interest rates decreases First...
Kimbo Widgets Inc. purchased new cloaking machinery five years ago for $10 million. The machinery can be sold to the Rimalons today for $9.4 million, Kimbo's current statement of financial position shows net fixed assets of $8.0 million, current liabilities of $0.81 million, and networking capital of $380,000. If all the current assets were liquidated today, the company would receive $120 million cash. (Do not round intermediate calculations. Enter the answers in dollars, not millions of dollars, le. 1,234,567. Omit...
An Fl has purchased a $209 million cap of 10 percent at a premium of 0.70 percent of face value. A $209 million floor of 4.9 percent is also available at a premium of .75 percent of face value. a. If interest rates rise to 11 percent, what is the amount received by the FI? What are the net savings after deducting the premium? b. If the Fl also purchases a floor, what are the net savings if interest rates...
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