What is the development "spread" on a building with a potential stabilized NOI of $100,000; total costs of $1,250,000; and an estimated going out cap rate of 6.5%. .02% 150 basis points 800 basis points 9.5% $1,538,461.54
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- 1. Determine the B/C ratio for the following project First Cost P100, 000 Project life, years 5 Salvage value Annual benefits P10, 000 P60, 000 Annual O and M Interest rate, % P22, 000 15 Ans: B/C = 1.16 2. Data for two alternatives are as follows: Alternatives A В Investment Р35, 000 P50, 000 Annual benefits P20, 000 P25, 000 Annual O and M Estimated life, years Net salvage value Ре, 450 P13, 830 4 8. Р3, 500 Using an interest rate of 20%, which alternative should be chosen? Ans: Alternative A is referred over Alternative BIf a $300,000 investment has a project profitability index of 0.25, what is the netpresent value of the project?a. $75,000b. $225,000c. $25,000d. $275,000A project needs an initial investment of $100 and generates -$20 and $130 in year 1 and 2 respectively. What is the MIRR using the discounting method (WACC=10%)? 4.67 4.79 4.85% 4.88% Selected
- You are considering the following two mutually exclusive projects. The required rate of return is 11.25% for project A and 10.75% for project B. Which project should you accept? YEAR PROJECT A PROJECT B 0 -$48,000 -$126,900 1 $18,400 $69.700 2 $31,300 $80,900 3 $11,700 $0Compute the (a) net present value, (b) internal rate of return (IRR), (c) modified internal rate of return (MIRR), and (d) discounted payback period (DPB) for each of the following projects. The firm’s required rate of return is 13 percent. Year Project AB Project LM Project UV 0 $(90,000) $(100,000) $ (96,500) 1 39,000 0 (55,000) 2 39,000 0 100,000 3 39,000 147,500 100,000 Which project(s) should be purchased if they are independent? Which project(s) should be purchased if they are mutually exclusive?Consider the following two mutually exclusive projects: Year Cash Flow(A) -$ 63,000 39,000 33,000 22,500 14,600 Cash Flow(B) -$ 63,000 25,700 29,700 35,000 24,700 4 1-What is the IRR for each project? Project A Project B % % 2.IF you apply the IRR decision rule, which project should ti 3.Assume the required return is 14 percent. What is the NP Project A Project B 0123
- 1. Determine the B/C ratio for the following project. First Cost P100, 000 Project life, years 5 Salvage value P10, 000 Annual benefits P60, 000 Annual O and M P22, 000 Interest rate, % 15 Ans: B/C = 1.164 You are considering the following investment activity. The facts are the following: Required investment 300,000.00 Discount Rate 9% Life of project 7.00 Years Net income for the project Sales 140,000.00 Expenses Material 25,000.00 Labor 35,000.00 Overhead 15,000.00 Total Expenses 75,000.00 Net Income 65,000.00 What is the NPV of this investment? What is the IRR of this investment? Would you fund this project? Show your work below Year 0 1 2 3 4 5 6 7A company is considering two projects. The discount rate is 10 percent, and the projects’ cash flows would be: Years 0 1 2 3 Project A -$700 $500 $300 $100 Project B -$700 $100 $300 $600 Calculate the projects’ NPVs and IRRs. Project (A): NPV= =777.61-700=77.61 IRR= =18.005% Project (B): NPV= =789.63-700=89.63 IRR= =15.559% If the two projects are independent, which project(s) should be chosen? If the two projects are mutually exclusive, which project should be chosen?
- Two alternatives are being considered for a certain project. B $15,000 $3,800 Initial Cost Uniform annual benefits Useful life A $10,000 $2,500 O a. 1.37 O b. 1.27 O c. 1.07 O d. 1.17 6 6 If money is worth 12% annually, compute the benefit ratio of the difference between the alternatives.The NPV of a project is $8,000. If the IRR is 12%, which of the following is the required rate of return for the project? Group of answer choices A.12.00% B.none of these are possible answers C.15.97% D.11.75%Consider the following two mutually exclusive investment projects:Project Cash Flowsn A B 0 -$4,000 -$8,5001 $400 $11,5002 $7,000 $400Assume that the MARR = 15%.(a) Using the NPW criterion, which project would you select?(b) On the same chart, sketch the PW(i) function for each alternative fori = 0% and 50%. For what range of i would you prefer Project B?