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Question
Given the following information regarding an income producing property, determine the internal rate of return (IRR) using levered cash flows. Expected Holding Period: 5 years; 1st year Expected NOI: $89,100; 2nd year Expected NOI: $91,773; 3rd year Expected NOI: $94,526; 4th year Expected NOI: $97,362; 5th year Expected NOI: $100,283; Debt Service in each of the next five years: $58,444; Current Market Value: $885,000; Required equity investment: $221,250; Net Sale Proceeds of Property at end of year 5: $974,700; Remaining Mortgage Balance at end of year 5: $631,026.
A. 10.6%
B. 12.2%
C. 22.9%
D. 33.4%
Answer
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Related questions
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When multiple individuals have use of a property, but their interests are not simultaneous, this type of co-ownership is referred to as a:
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B. Tenancy by the entirety
C. Condominium
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In a mortgage agreement, the borrower conveys to the lender a security interest in the mortgage property. The lender, i.e. the individual who receives the mortgage claim, is known as the:
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B. mortgagor
C. agent
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Most Adjustable Rate Mortgage (ARM) loans have been marketed with a temporarily reduced interest rate commonly referred to as a:
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B. teaser rate
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D. prepayment rate
Q:
A significant number of mortgage loans use adjustable interest rates, in which the interest rate of the loan is tied to an index rate that fluctuates over time. For income-producing property, the most common index rate is the:
A. one-year U.S. Treasury constant maturity rate
B. prime rate
C. London Interbank Offered Rate (LIBOR)
D. cost-of-funds index
Q:
Analysis of a subject propertys pro forma reveals that its fifth year net operating income (NOI) is projected to be $100,282 (you can assume that this cash flow occurs at the end of the year). If you estimate the projected rental growth rate for the property to be 3% per year and the going-out capitalization rate in year five to be 10%, determine the net sale proceeds the current owner of the property would receive if he were to sell the property at the end of year five and incur selling expenses that amounted to $58,300.
A. $944,520.00
B. $974,610.00
C. $1,002,820.00
D. $1,032,910.00
Q:
Suppose that examination of a pro forma reveals that the fifth year net operating income (NOI) for an income producing property that you are analyzing is $138,446 (you can assume that this cash flow occurs at the end of the year). If you estimate the projected rental growth rate for the property to be 5% per year, determine the projected sale price of the property at the end of year five if the going-out capitalization rate is 9%.
A. $988,900.00
B. $1,465,037.00
C. $1,538,289.00
D. $1,615,203.00
Q:
Suppose that an income producing property is expected to yield cash flows for the owner of $10,000 in each of the next five years, with cash flows being received at the end of each
period. If the opportunity cost of investment is 12% annually and the property can be sold for $100,000 at the end of the fifth year, determine the value of the property today.
A. $36, 047.76
B. $56,742.69
C. $83,333.33
D. $92,790.45