Hrtm 421 Final Exam (A+ Guaranteed)

loan amortization schedule correct answers - provides info on the year, payment, principal, interest, and balance of a loan - debt service payments remain fixed income approach to value correct answers - estimates future cash flows including an assumed sale at the end of the period - discounts cash flows using WACC - PV is the appraiser's estimate of the current market value lease vs purchase decision correct answers determine if the PV of lease payments is less than the purchase option analysis of multiple investments (ROI) correct answers ROI = cash flow / equity investment - advantage: easy to calculate -disadvantages: doesn't take into consideration the TVM and potential sales value of the asset analysis of multiple investments (PV and NPV) correct answers investment is favorable as long as the PV is greater than the cost - advantages: takes into consideration the TVM and potential sales value of the asset - disadvantages: cannot compare investments with varying costs analysis of multiple investments (IRR) correct answers advantages: - takes into consideration the: -TVM -potential sales value of the asset -allows you to compare multiple investments requiring varying amounts of capital disadvantages: - assumes that cash distributions are reinvested at the IRR - if negative cash low is projected, there is a possibility for multiple IRRs to be computed need for investment package correct answers - first step in gaining approval for funding is the preparation of a professional investment package - it should tell the story and sell the project to capital sources