Question: EXERCISE 3.8 1. Using the data in Figure 3.8.3, assume that all the annual increases are the same and assume that Ms. Johnson is able

EXERCISE 3.8 1. Using the data in Figure 3.8.3, assume that all the annual increases are the same and assume that Ms. Johnson is able to keep the building for ten years and will be able sell the building at 5.555 times the annual rent roll after ten years What will be the IRR of the investment?Functions CHAPTER 3 53 G Year O Year 1 Year 2 Year 3 Year 4 Year 5 Purchase Price/Price Sold -1000000 1216531.24 3 Loan 800000 800000.00 4 Down Pay/Net Profit 200000 416531.24 5 INCOME Annual Rental Income 180000.00 187200.00 194688.00 202475.52 210574.54 218997.52 7 EXPENSES 8 Wages 12000.00 12360.00 12730.80 13112.72 13506.11 13911.29 9 Real Estate Tax, Water 40000.00 41200.00 42436.00 43709.08 45020.35 46370.96 10 Mortgage ( Interest only) 48000.00 48000.00 48000.00 48000.00 48000.00 11 Electricity 8000.00 8480.00 8988.80 9528.13 10099.82 10705.80 12 Heating, Fuel 30000.00 31800.00 33708.00 35730.48 37874.31 40146.77 13 Repairs 10000.00 10500.00 11025.00 11576.25 12155.06 12762.82 14 Supply 10000.00 10500.00 11025.00 11576.25 12155.06 12762.82 15 Insurance 9000.00 9540.00 10112.40 10719.14 11362.29 12044.03 16 Maintenance 11000.00 11220.00 11444,40 11673.29 11906.75 12144.89 17 Management 12000.00 12000.00 12000.00 12000.00 12000.00 12000.00 18 Total Expenses 142000.00 195600.00 201470.40 207625.34 214079.75 220849.37 19 20 Gross Profit/loss 8400.00 6782.40 -5149 82 -3505.21 -1851.85 21 Cash In/Out Flow 200000 8400 00 6782 40 -5149,82 3505.21 414679.39 22 IRR 13.70% Figure 3.8.3EXERCISE 3.7 Mr. King invested $30,000 in the First Eagle fund in year 2004. He continued to invest in the same fund from 2005 to 2011 as in the following schedule: Year 2005 $30,000 Year 2006 $50,000 Year 2007 $50,000 Year 2008 $150,000 Year 201 1 $100,090 All the dividends distributed by the company from time to time were reinvested in the same fund. In year 2012 Mr. King received a report showing a total balance of $548,360 in his account. What is the internal Rate of return of Mr. King's investments in the mutual fund? Answer: 7% (Note: cash flows for Years 2009 and 2010 are ( and (.)

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