Question: 1. You pay $1m for a property with 9% cap rate, keep it for 5 years, and sell at the end of year 5 at

1.You pay $1m for a property with 9% cap rate, keep it for 5 years, and sell at the end of year 5 at the same cap rate. The selling costs are 5% of the price. What is your IRR? Enter your answer in percent, but without percent sign.

2.You are doing the same as above but instead of paying cash, you take a 70% LTV IO loan at 5% annual rate. What is your IRR?

3.In addition to the loan above you take a mezzanine IO loan of $200k at 8% annual rate. What is your IRR? The neighborhood is declining, so your selling cap rate is 11% in questions 10-13. You have limited liability: you can walk away anytime. If you walk away in yeart, all cash flows starting yeartbecome zero (including yeart).

4.You pay cash as in Question 1 above. What is your IRR?

5.You take the loan as in Question 2 above. What is your IRR?

6.You take an additional mezzanine loan as in Question 3 above. What is your IRR?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Lets start by calculating the IRR for each scenario step by step Question 1 Pay 1m for a property with a 9 cap rate keep it for 5 years and sell at the same cap rate with 5 selling costs Initial Purch... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Carrie DLake, Reed A. Green, and Doug A. Divot share a passion for golf and decide to go into the golf club manufacturing business together. On January 2, 2020, DLake, Green, and Divot form the...

Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...

Question: Old MathJax webview Old MathJax webview i need ans of these question but the source is alot Old MathJax webviewOld MathJax webview i need ans of these question but the source is alot these...

for this case study carefully read the article titled "The Case for Reparations" The Atlantic Introduction Provide an overview of the situation Identify critical issues underlying the problems...

This question shows how leverage influences IRR and that high leverage may incentivize default. 1. You pay $1m for a property with 9% cap rate, keep it for 5 years, and sell at the end of year 5 at...

1. You pay $1m for a property with 9% cap rate, keep it for 5 years, and sell at the end of years at the same cap rate. The selling costs are 5% of the price. What is your IRR? Enter your answer in...

1. You pay $1m for a property with 9% cap rate, keep it for 5 years, and sell at the end of year 5 at the same cap rate. The selling costs are 5% of the price. What is your IRR? Enter your answer in...

i need help from 1-6 pleasw Homework #7 - Due 11:59pm Tuesday, December 10 Mortgage-backed securities, etc Each question is worth 1/2 points to the Total, so if you do the whole HW, you will receive...

1. You pay $1m for a property with 9% cap rate, keep it for 5 years, and sell at the end of year 5 at the same cap rate. The selling costs are 5% of the price. What is your IRR? Enter your answer in...

Consider the information given below. Output Inputs 310,000 units 6,100 labor hours @ $17.00 per hour Sales price = $1,306.00/unit Material cost = $42,250,000 Utilities cost = $4,200 Calculate the...

Identify at least one fallacy in each sentence .Then revise the sentence to make them more reasonable. 1- The American government can sell nuclear technology to nonnuclear nations, so why cant...

Evaluate the integral. HINT [ See Example 2 . ] 5 2 x 2 + 9 x 1 dx

On July 1, 2016, Osceola Company retired a metal stamping machine that it had originally purchased for $1,500,000. At December 31, 2015, the machine had a book value of $125,000 and was being...

Posting purchases and cash payment transactions. INSTRUCTIONS 1. Open the general ledger accounts and accounts payable ledger accounts indicated on the next page. Enter the balance of Cash as of...

Was it wrong for Lenny to ignore the other stakeholders ' wishes?

Ye Olde Book Store opened its doors for business on May 1. During May, the following transactions took place: May 1 Linda Berrill began the business by depositing $42,000 in the new companys bank...

Classify the following items as (1) Prepaid expense, (2) Unearned revenue, (3) Accrued revenue, or (4) Accrued expense. (a) Cash received for services not yet (b) Insurance paid (c) Rent revenue...

6 Theory of Machines 5. A shaft carries five masses A, B, C, D and E which revolve at the same radius in planes which are equidistant from one another. The magnitude of the masses in planes A, C and...

For each of the following situations, indicate whether the taxpayer(s) is (are) required to file a tax return for 2012. Explain your answer. a. Helen is a single taxpayer with interest income in 2012...

Tom has a successful business with $100,000 of income in 2012. He purchases one new asset in 2012, a new machine which is 7-year MACRS property and costs $25,000. If you are Tom's tax advisor, how...

Karim Depak received a Form 1099-B showing the following stock transactions and basis during 2012: None of the stock is qualified small business stock. Calculate Karim's net capital gain or loss...

Contribution margin analysis obj. 5 Dozier Industries Inc. manufactures only one product. For the year ended December 31, the contribution margin increased by $38,500 from the planned level of...

Absorption and variable costing income statements obj. 1, 2 During the first month of operations ended July 31, 2016, YoSan Inc. manufactured 2,400 flat panel televisions, of which 2,000 were sold....

=+c. For any number k satisfying 25 , k , k 1 4 , 5,