In: Accounting
You are an employee of University Consultants. Ltd., and have been given the following assignment. You are to present an investment analysis of a new small residential income producing property for sale to a potential investor. The asking price for the property is $1, 250,000; rents are estimated at $200,000 during the first year and are expected to grow at 3 percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A 70 percent loan can be obtained at 11 percent interest for 30 years. The property is expected to appreciate in value at 3 percent per year and is expected to be owned for five years and then sold.
What is the investor's expected before-tax internal rate of return on equity invested (BTIRR)?
What is the first-year debt coverage ratio?
What is the terminal capitalization rate?
What is the NPV using a 14% discount rate? What does this mean?
What is the profitability index using a 14% discount rate? What does this mean?