You are an analyst for XYZ Real Estate Inc. The vice- president has asked you to...
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You are an analyst for XYZ Real Estate Inc. The vice- president has asked you to perform a basic analysis on an industrial property that the company is considering acquiring. The vice-president is adamant that XYZ Real Estate will only acquire the property if the project meets its investment WACC and/or required equity return of 14%. He provides you with the following information: XYZ Real Estate has an income tax rate of 28% The anticipated holding period is 7 years The acquisition price will be $20,000,000 and acquisition costs should be an additional $200,000. The property should generate NOI of $1,600,000 for each of the next 10 years At the end of the seventh year the property will be sold at an anticipated cap rate of 8% and sales expenses will be $400,000 The financing will be a 7-year mortgage at a rate of 5% with a 25-year amortization and have an initial LTV of 75%. a) b) c) d) e) Calculate the unlevered NPV of this investment Calculate the unlevered IRR of this investment Calculate the levered NPV Calculate the levered IRR of this investment Would you recommend buying this property (answer Yes or No)? You are an analyst for XYZ Real Estate Inc. The vice- president has asked you to perform a basic analysis on an industrial property that the company is considering acquiring. The vice-president is adamant that XYZ Real Estate will only acquire the property if the project meets its investment WACC and/or required equity return of 14%. He provides you with the following information: XYZ Real Estate has an income tax rate of 28% The anticipated holding period is 7 years The acquisition price will be $20,000,000 and acquisition costs should be an additional $200,000. The property should generate NOI of $1,600,000 for each of the next 10 years At the end of the seventh year the property will be sold at an anticipated cap rate of 8% and sales expenses will be $400,000 The financing will be a 7-year mortgage at a rate of 5% with a 25-year amortization and have an initial LTV of 75%. a) b) c) d) e) Calculate the unlevered NPV of this investment Calculate the unlevered IRR of this investment Calculate the levered NPV Calculate the levered IRR of this investment Would you recommend buying this property (answer Yes or No)?
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XYZ Real Estate Investment Analysis Discount Rate 14 WACCRequired Equity Return Tax Rate 28 Holding Period 7 years Acquisition Costs Property Price 20... View the full answer
Related Book For
Auditing a business risk appraoch
ISBN: 978-0324375589
6th Edition
Authors: larry e. rittenberg, bradley j. schwieger, karla m. johnston
Posted Date:
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