Real Estate Appraisal

QUESTION 13

1. Reproduction cost

   		Is the cost associated with the construction of a substitute of like utility
   		Is the cost to construct an exact duplicate of the subject improvements
   		Is always the same as replacement cost
   		Can only be estimated by a contractor or an architect

1 points   

QUESTION 14

1. Direct costs are

   		Expenditures for items that are necessary but not usually included in the construction contract
   		Expenditures for the labor and material used in the construction of the improvements
   		An incentive that is market derived and provides compensation for the developer
   		The costs associated with fees and interest

1 points   

QUESTION 15

1. Physical deterioration refers to

   		Losses in value from wear and tear
   		Losses in value from all causes
   		Losses in value from changes in market tastes
   		Losses in value from proximity to an adverse condition in the neighborhood

1 points   

QUESTION 16

1. If a property has diminished valued because of factors outside the property, the loss is classified as:

   		Functional obsolescence
   		External obsolescence
   		Physical obsolescence
   		Physical depreciation

The Spitfire Model Airplane Company has the following modified income statement ($000) at 100,000 units of production.

1. What are Spitfire's contribution margin and dollar breakeven point? Enter your contribution margin answer in decimals and not in percentage. Enter your break-even sales answer in whole dollars. For example, an answer of $1 thousand should be entered as 1,000, not 1. Do not round intermediate calculations.

   CM (to two decimal places)
   SB/E (to the nearest dollar)	$

2. Calculate Spitfire's current DFL, DOL, and DTL. Round the answers to two decimal places. Do not round intermediate calculations.

The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $11 million, it currently uses only common equity, it has no future plans to use preferred stock in its capital structure, and its federal-plus-state tax rate is 40%. The CFO has estimated next year's EBIT for three possible states of the world: $4.5 million with a 0.2 probability, $1.5 million with a 0.5 probability, and $0.3 million with a 0.3 probability. Calculate Neal's expected ROE, standard deviation, and coefficient of variation for each of the following debt-to-capital ratios. Do not round intermediate calculations. Round your answers to two decimal places at the end of the calculations.

Debt/Capital ratio is 0.

Debt/Capital ratio is 10%, interest rate is 9%.

Debt/Capital ratio is 50%, interest rate is 11%.

Debt/Capital ratio is 60%, interest rate is 14%.

Ross Textiles wishes to measure its cost of common stock equity. The​ firm's stock is currently selling for $58.26. The firm just recently paid a dividend of $3.97. The firm has been increasing dividends regularly. Five years​ ago, the dividend was just $2.96. After underpricing and flotation​ costs, the firm expects to net $54.76 per share on a new issue.

a.  Determine average annual dividend growth rate over the past 5 years. Using that growth​ rate, what dividend would you expect the company to pay next​ year?

b.       Determine the net​ proceeds, Nn​, that the firm will actually receive.

c.  Using the​ constant-growth valuation​ model, determine the required return on the​ company's stock, rs​, which should equal the cost of retained​ earnings, rr.

d.  Using the​ constant-growth valuation​ model, determine the cost of new common​ stock, rn.

Company Q’s current return on equity (ROE) is 14%. It pays out one-half of earnings as cash dividends (payout ratio=0.5). The current book value per share is $50. Book value per share will grow as Q reinvests earnings. Assume that the ROE and payout ratio stays constant for the next four years. After that, competition forces ROE down to 11.5% and the payout ratio increases to 0.8. The cost of capital is 11.5%.

1. What are Q’s EPS and dividends next year? How will EPS and dividends grow in years 2, 3, 4, 5, and subsequent years?
2. What is Q’s stock worth per share? How does that value depend on the payout ratio and growth rate after year 4?

1. What are the necessary functions of financial markets?
2. Explain the essence of bank capital rules.

Read these instructions carefully, and then read the text “The Highs and Lows of Vocational
Education” on the next page. Then write an essay of 350-400 words* in response to this essay title:

You must support your ideas with:
- Evidence taken from the ‘The Highs and Lows of Vocational Education” reading text (at
least one item, which must be referenced with an in-text citation)
AND
- Other evidence regarding either Hong Kong OR China (which you may have read and can
reference correctly, or which you have made up and should be referenced with your family
name and the current year, e.g. (Fan, 2019). You are not required to write a reference list.

Describe the advantages and disadvantages of studying vocational education, in either Hong

Kong or China, and in another country.

The Highs and Lows of Vocational Education [adapted]

by Matt Barnum (2017)
What’s one education topic that right wing, left wing, and all politicians support? It is vocational
training - something they’ve all said America needs in order to create a balance of practical as well
as academic school leavers. While President Trump praised Germany’s approach to vocational
education recently, he actually plans to reduce funding for it, but, at least in theory, there’s wide
support for helping more students learn career-specific skills.
Yet new international research points to a significant downside of such programs: Students may
benefit early in their careers, but are harmed later in life as the economy changes and they lack the
less specific skills necessary to adapt. The study raises concerns about the positive and negative
effects of expanding vocational training in the United States. “Individuals with general education
initially face worse employment outcomes, but with improved experience as they become older,
they have increased employment opportunities, relative to individuals with vocational education,”
write four researchers in the study.
Many European and developing countries provide extensive vocational training, including
apprenticeships with involvement from industry, the authors note. That stands in contrast with the
U.S., which has reduced or eliminated separate vocational tracks in most high schools. Looking at
11 European countries, the researchers compared students within the same country who went on the
vocational track to similar students who went through a general-education program. The result is
that although vocational students make higher salaries and are more likely to be employed as young
adults, this advantage fades over time; by their late forties, those who went through a general
education program have higher employment rates. Those findings were confirmed with more
detailed data from Germany. “The advantages of vocational training in smoothing entry into the
labor market have to be set against disadvantages later in life,” the study concludes.
At age 10, Germany requires students to choose a vocational high school, academic high school, or
what one article described as “something in between.” Students have frequent opportunities to move
between these choices as they progress with their studies. However, in the U.S., vocation-focused
courses are often just a small part of a student’s course load. As of 2009, the average American
student took 3.6 vocational classes in high school.
The authors of the latest research say the findings don’t imply that vocational education is
necessarily a bad idea, just that it is important to understand the advantages and disadvantages of
each choice. The results also suggest that policymakers looking only at the short-term impacts of
such programs may not be getting an accurate understanding of their effects. One recent study of
Arkansas’s high-school vocational program, which requires students to take six career-focused
classes in high school in order to graduate and allows them to concentrate in specific areas, found
that participants had higher earnings and employment rates as young adults. Longer-run impacts
were not examined, however.

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 9%. The probability distribution of the risky funds is as follows: Expected Return Standard Deviation Stock fund (S) 20 % 35 % Bond fund (B) 11 15 The correlation between the fund returns is 0.09. Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)

If the PV of an ordinary four year annuity is $1000 with an interest rate of 6%, what is the FV if were an annuity due instead?

Rogue Rotors has debt with a market value of​ $350,000, preferred stock with a market value of​ $100,000, and common stock with a market value of​ $650,000. If debt has a cost of​ 7%, preferred stock a cost of​ 9%, common stock a cost of​ 13%, and the firm has a tax rate of​ 30%, what is the​ WACC?

At year-end 2014, total assets for Microloft Inc. were $1.4 million and accounts payable were $380,000. Sales, which in 2014 were $2.7 million, are expected to increase by 25% in 2015. Total assets and accounts payable are proportional to sales, and that relationship will be maintained; that is, they will grow at the same rate as sales. Microloft typically uses no current liabilities other than accounts payable. Common stock amounted to $435,000 in 2014, and retained earnings were $290,000. Microloft plans to sell new common stock in the amount of $85,000. The firm’s profit margin on sales is 6%; 60% of earnings will be retained. How much new long-term debt financing will be needed in 2015 (Hint: AFN – New stock equals new long-term debt)

In a few sentences, please explain how you can save more money. What actions can you take to save more money? How can you distinguish between your “needs” and your “wants”?

Too young inc has a bond outstanding with a coupon rate of 6.8 percent and semiannual payments. the bond currently sells for 949 and matures in 25 years. the par value is 1000. what is the companys pre tax cost of debt

Assume a common stock currently just paid a dividend of $5 per share. The stock’s current price is $50 per share. It is estimated that the dividend will grow at a constant rate of 6% per year forever. What is the cost of equity?

Raymond Mining Corporation has 10.1 million shares of common stock outstanding, 450,000 shares of 5% $100 par value preferred stock outstanding, and 175,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $49 per share and has a beta of 1.55, the preferred stock currently sells for $98 per share, and the bonds have 15 years to maturity and sell for 116% of par. The market risk premium is 8.9%, T-bills are yielding 4%, and Raymond Mining’s tax is 38%.

a. What is the firm’s market value capital structure? (Enter your answers in whole dollars.)

b. If Raymond Mining is evaluating a new investment project that has the same risk as the firm’s typical project, what rate should the firm use to discount the project’s cash flows? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 3 decimal places.)

Discount rate              %