Assignment_4_Solution_Updated

# Assignment_4_Solution_Updated - Prepared by Keyi Xu Problem...

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Prepared by Keyi Xu Problem 1 (1 points) Year Year Year Year 0 1 2 3 Operation CF \$200,000 \$200,000 \$200,000 Capital CF N/A Net \$200,000 \$200,000 \$200,000 89% 80% 71% PV \$178,571.43 \$159,438.78 \$142,356.05 Total NPV (sum of the above row) = \$1,761,237.81 Problem 2 (3 points) Year Year Year Year 0 1 2 3 Operation CF \$200,000 \$200,000 \$200,000 Capital CF N/A Discount Rate for intralease 10% 10% 10% PV of operatoin \$181,818.18 \$165,289.26 \$150,262.96 Discount Rate for interlease N/A N/A N/A PV of operatoin \$181,818.18 \$165,289.26 \$150,262.96 Total NPV (sum of the above row) = \$1,774,118.35 Problem 3 (5 points) Year Year Year Year 0 1 2 3 Operation CF \$200,000 \$200,000 \$200,000 Capital CF at 10% -\$2,000,000 Net -\$2,000,000 \$200,000 \$200,000 \$200,000 89% 80% 71% PV -\$2,000,000 \$178,571.43 \$159,438.78 \$142,356.05 a. Total NPV (sum of the above row) = -\$238,762.19 1 point b. IRR = 9.86% 1 point c. Ini Cash Flow at Ini Yield = 10.00% 1 point d. Yield of Subsequent Cash Flow Growth = 0.97% 1 point Year Year Year Year 0 1 2 3 Operation CF \$200,000 \$200,000 \$200,000 -\$2,000,000 Net -\$2,000,000 \$200,000 \$200,000 \$200,000 e. Yield of valuation change = -1.10% 1 point Year Year Year Year 0 1 2 3 Operation CF \$200,000 \$200,000 \$200,000 -\$2,000,000 Net -\$2,000,000 \$200,000 \$200,000 \$200,000 Discount Factor (all at 12% ) Discount Factor (all at 10% ) Capital CF at 10% Capital CF at 10%

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Problem 4 (6 points) Property value: 1,000,000 Appreciation Rate: 2.0% Bldg value/Property value: 90% Cap rate: 10% Income tax rate: 40% LTV: 80% Interest Rate: 10% Amortization Term 30 years Capital gain tax: 20% Dep straightline: 39 years Dep recapture: 20% 1 2 3 4 Unlevered Year Prop Value NOI CI BTCF 0 \$1,000,000.00 -\$1,000,000.00 1 \$1,020,000.00 \$100,000.00 \$0.00 \$100,000.00 2 \$1,040,400.00 \$102,000.00 \$0.00 \$102,000.00 3 \$1,061,208.00 \$104,040.00 \$0.00 \$104,040.00 4 \$1,082,432.16 \$106,120.80 \$0.00 \$106,120.80 5 \$1,104,080.80 \$108,243.22 \$0.00 \$108,243.22 6 \$1,126,162.42 \$110,408.08 \$0.00 \$110,408.08 7 \$1,148,685.67 \$112,616.24 \$0.00 \$112,616.24 8 \$1,171,659.38 \$114,868.57 \$0.00 \$114,868.57 9 \$1,195,092.57 \$117,165.94 \$0.00 \$117,165.94 10 \$1,218,994.42 \$119,509.26 \$0.00 \$1,338,503.68 12.00% a 1 point
Year Year Year Year Year 4 5 6 7 8 \$200,000 \$200,000 \$220,000 \$220,000 \$220,000 \$200,000 \$200,000 \$220,000 \$220,000 \$220,000 64% 57% 51% 45% 40% \$127,103.62 \$113,485.37 \$111,458.85 \$99,516.83 \$88,854.31 Year Year Year Year 4 5 6 7 \$200,000

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## This note was uploaded on 05/12/2008 for the course REAL ESATE 410 taught by Professor Chu during the Spring '08 term at University of Wisconsin.

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Assignment_4_Solution_Updated - Prepared by Keyi Xu Problem...

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