RM 450 Exam 3 Questions n complete
solutions rated A+
Consider the following investment
- Purchase price $900,000
- Interest only mortgage $560,000 @ - 10% annual rate, payments made annually
- NOI is $89,000, $91,000, and $95,000 in years 1 to 3
- Sell at the end of year 2, cap rate = 10%,
- no transaction cost
- Required yield is 8% per annum
The NPV of this investment is
A. $34,925
B. $44,925
C. $54,925
D. $64,925 - correct answer ✔✔C is correct
- Purchase price $900,000
- Interest only mortgage $560,000 @ 10% annual rate, payments made annually
- NOI is $89,000, $91,000, and $95,000 in years 1 to 3
- Sell at the end of year 2, cap rate = 10%, no transaction cost
- Required yield is 8% per annum
Calculations
- BTCF is $33,000, $35,000, and $39,000 for years 1 to 3
- Sale price = $95,% = $950,000
- Equity reversion = $950,000 - $560,000 = $390,000
- PV of cash flows = $394,925
,- NPV = $394,925 - $340,000 = $54,925
Consider the following investment
- Purchase price $900,000
- Interest only mortgage $560,000 @ 10% annual rate, payments made annually
- NOI is $89,000, $91,000, and $95,000 in years 1 to 3
- Sell at the end of year 2, cap rate = 10%, no transaction cost
The IRR of this investment is
A. 16.76%
B. 19.25%
C. 22.24%
D. 25.80% - correct answer ✔✔A is correct
- Purchase price $900,000
- Interest only mortgage $560,000 @ 10% annual rate, payments made annually
- NOI is $89,000, $91,000, and $95,000 in years 1 to 3
- Sell at the end of year 2, cap rate = 10%, no transaction cost
Calculations
- Cash flows are -$340,000, $33,000, and $425,000 for years 0 to 2
- IRR = 16.76%
Consider the following investment
- Purchase price $3 million (year 0)
- Cash flow from operations $0.4 million (years 1 and 2)
- Cash flow from selling the property $4 million (year 2)
- The percentage of the IRR that comes from cash flow from operations is
, A. 10%
B. 15%
C. 19%
D. 23% - correct answer ✔✔C is correct
C. 19%
Step 1: calculate the IRR of this investment
CF0 = -3,
CF1 = 0.4,
CF2 = 4.4
r = 27.96%
Step 2: calculate the PV of future cash flows
PV for cash flows from operations
CF0 = 0,
CF1 = 0.4,
CF2 = 0.4,
r = 27.96
NPV = 0.56
PV for cash flow from selling the property
CF0 = 0,
CF1 = 0,
CF2 = 4,
r = 27.96
solutions rated A+
Consider the following investment
- Purchase price $900,000
- Interest only mortgage $560,000 @ - 10% annual rate, payments made annually
- NOI is $89,000, $91,000, and $95,000 in years 1 to 3
- Sell at the end of year 2, cap rate = 10%,
- no transaction cost
- Required yield is 8% per annum
The NPV of this investment is
A. $34,925
B. $44,925
C. $54,925
D. $64,925 - correct answer ✔✔C is correct
- Purchase price $900,000
- Interest only mortgage $560,000 @ 10% annual rate, payments made annually
- NOI is $89,000, $91,000, and $95,000 in years 1 to 3
- Sell at the end of year 2, cap rate = 10%, no transaction cost
- Required yield is 8% per annum
Calculations
- BTCF is $33,000, $35,000, and $39,000 for years 1 to 3
- Sale price = $95,% = $950,000
- Equity reversion = $950,000 - $560,000 = $390,000
- PV of cash flows = $394,925
,- NPV = $394,925 - $340,000 = $54,925
Consider the following investment
- Purchase price $900,000
- Interest only mortgage $560,000 @ 10% annual rate, payments made annually
- NOI is $89,000, $91,000, and $95,000 in years 1 to 3
- Sell at the end of year 2, cap rate = 10%, no transaction cost
The IRR of this investment is
A. 16.76%
B. 19.25%
C. 22.24%
D. 25.80% - correct answer ✔✔A is correct
- Purchase price $900,000
- Interest only mortgage $560,000 @ 10% annual rate, payments made annually
- NOI is $89,000, $91,000, and $95,000 in years 1 to 3
- Sell at the end of year 2, cap rate = 10%, no transaction cost
Calculations
- Cash flows are -$340,000, $33,000, and $425,000 for years 0 to 2
- IRR = 16.76%
Consider the following investment
- Purchase price $3 million (year 0)
- Cash flow from operations $0.4 million (years 1 and 2)
- Cash flow from selling the property $4 million (year 2)
- The percentage of the IRR that comes from cash flow from operations is
, A. 10%
B. 15%
C. 19%
D. 23% - correct answer ✔✔C is correct
C. 19%
Step 1: calculate the IRR of this investment
CF0 = -3,
CF1 = 0.4,
CF2 = 4.4
r = 27.96%
Step 2: calculate the PV of future cash flows
PV for cash flows from operations
CF0 = 0,
CF1 = 0.4,
CF2 = 0.4,
r = 27.96
NPV = 0.56
PV for cash flow from selling the property
CF0 = 0,
CF1 = 0,
CF2 = 4,
r = 27.96
