ounted the next 12 years of net operating income of property X that is for sale and is currently being leased by Burger King .The lease term is 12 years. I used the cap rate of the property 5.5% as the discount rate. I ignored any rent increases. I assumed the property could be sold for 30% more than I paid. I have decided that I will buy the property if the NPV is over the asking price of $250,000. My analysis is correct. I can certainly confirm that the property is undervalued.. timenet operat

ounted the next 12 years of net operating income of property X that is for sale and is currently being leased by Burger King .The lease term is 12 years. I used the cap rate of the property 5.5% as the discount rate. I ignored any rent increases. I assumed the property could be sold for 30% more than I paid. I have decided that I will buy the property if the NPV is over the asking price of $250,000. My analysis is correct. I can certainly confirm that the property is undervalued.. timenet operat

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 8P

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I discounted the next 12 years of net operating income of property X that is for sale and is currently being leased by Burger King .The lease term is 12 years. I used the cap rate of the property 5.5% as the discount rate. I ignored any rent increases. I assumed the property could be sold for 30% more than I paid. I have decided that I will buy the property if the NPV is over the asking price of $250,000. My analysis is correct. I can certainly confirm that the property is undervalued.. time net operating income discount rate 0 -1,953,309 5.50% 1 $107,432 2 $107,432 3 $107,432 4 $107,432 5 $107,432 6 $107,432 7 $107,432 8 $107,432 9 $107,432 10 $107,432 11 $107,432 12 $2,646,734 True False
BigCo is considering leasing the new equipment that it requires, for $146000 a year, payable in advance. The cost of the equipment is $775000, and will last for 5 years. The expected scrap value at the end of 5th year is $140000. Assume that the equipment will be fully depreciated under straightline method. The tax rate is 35%, the cost of equity is 13% and the cost of debt is 10%. i. What is the net cost of buying? ii. What is the net cost of leasing? iii. What is the net advantage of leasing (NAL)? iv. What is the maximum lease payment that would make BigCo indifferent between leasing or buying?
. WellyWeta workshop is considering buying a machine that costs $545,000. The machine will be depreciated over five years by the straight-line method and will be worthless at that time. The company can lease the machine with year-end payments of $140,000. The company can issue bonds at an interest rate of 7 percent. If the corporate tax rate is 21 percent, should the company buy or lease? handwrite please
Ramsis is a heavy equipment rental company. It is considering the purchase of Tower crane at a price of BD 775,000, This crane is expected to operate for 15 years before retirement with no salvage value at the end. The company is planning to rent the crane for BD 108.000 per year starting year 4 and the rental increases by 109% thereafter. Cost of this maintenance is expected to be BD 15,000 each year. a) What is the discounted payback period, if the MARR is 7% pr year? b) In your engineering analysis study, which method would you select (Payback or Present worth) to solve this problem? And why? For the toolbar, press ALT+F10 (PC) or ALT-FN-F10 (Mac).
Super Sonics Entertainment is considering buying a machine that costs $445,000. The machine will be depreciated over five years by the straight-line method and will be worthless at that time. The company can lease the machine with year-end payments of $121,000. The company can issue bonds at a 10 percent interest rate. If the corporate tax rate is 35 percent. Assume that lease payments occur at the end of the year Calculate the NAL
RKE & Associates is considering the purchase of a building it currently leases for $30,000 per year .The owner of the building put it up for sale at a price of $180,000 but because the firm has been a good tenant ,the owner offered to sell it to RKE for a cash price os $160,000 now .If purchased now, how long will it be before the company recovers its investment at an interest rate of 12% per year ?Solve by using the NPER function.
RKE & Associates is considering the purchase of a building it currently leases for $30,000 per year. The owner of the building put it up for sale at a price of $180,000, but because the firm has been a good tenant, the owner offered to sell it to RKE for a cash price of $160,000 now. If purchased now, how long will it be before the company recovers its investment at an interest rate of 15.00% per year? Solve by using the NPER function. The company will recover its investment in years.
Your company is trying to decide whether it should purchase a copier from Xerox or lease it. The copier has an expected life of 6 years, after which it has only marginal value (you can ignore any residual value). If you purchase it, the price is $145,000, payable now, and you would have to pay an annual service charge of $8,000. If you lease it, you would have an annual payment of $36,000 each year (for 6 years), which includes service. The lease payment and the annual service charge occur at the beginning of each year. The interest rate is 3.8%. Which option is least costly?
RKE & Associates is considering the purchase of a building it currently leases for $30,000 per year. The owner of the building put it up for sale at a price of $170,000, but because the firm has been a good tenant, the owner offered to sell it to RKE for a cash price of $160,000 now. If purchased now, how long will it be before the company recovers its investment at an interest rate of 15% per year?
RKE & Associates is considering the purchase of a building it currently leases for $30,000 per year. The owner of the building put it up for sale at a price of $170,000, but because the firm has been a good tenant, the owner offered to sell it to RKE for a cash price of $160,000 now. If purchased now, how long will it be before the company recovers its investment at an interest rate of 15% per year? Solve by speadsheet function or factor.
You purchased land 3 years ago for $55000 and believe its market value is now $80000. You are considering building a hotel on this land instead of selling it. To build the hotel, it will initially cost you $145000, an expense that you plan to depreciate straight line over the next three years. Wells Fargo offered you a loan for $60,000 at an 8% interest rate to be repaid over the next 4 years. You anticipate that the hotel will earn revenues of $220000 each year, while expenses will be a mere $22000 each year. The initial working capital requirement will be $10000 which will be recovered in the last year. The tax rate is 35%. Your estimated cost of capital is 10%. What is the net present value of this project? Group of answer choices $134,640.25 $209,680.13 $189,244.35 $105,938.07 $650,832.00 PLEASE EXPLAIN ANSWER SHOWING WORK!!!!!!!!!!!!!!!!!!!
Kotse Automotive is planning to expand its operation by planning to add a machine costing $90,000. The company is facing two possible options which are Option 1 - Lease arrangement which will require the company to pay $15,000 for 5 years and an option to purchase at $20,000 at the end of the lease Option 2 - Purchase the machine thru debt financing which would require the company to pay $20,000 for 5 years. The company is expected to spend $1,000 every year for 5 years for the machines repairs and maintenance. Which of the two options should the company choose if costs of debt is at 9%?