A real estate investor feels that the cash flow from a property will enable her to...

A real estate investor feels that the cash flow from a property will enable her to pay a lender $18,000 per year, at the end of every year, for 10 years. How much should the lender be willing to loan her if he requires a 9% annual interest rate (annually compounded, assuming the first of the 10 equal payment arrives one year from the date the loan is disbursed)

The answer was 115,517.83

Can you show the work. Thanks

Solutions

Expert Solution

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=18000[1-(1.09)^-10]/0.09

=18000*6.4176577

which is equal to

=$115517.83(Approx).

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

A real estate investor buys two properties. Monthly net income from the first property (an apartment...

A real estate investor buys two properties. Monthly net income from the first property (an apartment building) is $1,000 times the number of apartments that are rented out, minus $1,800 in property taxes and maintenance expenses. The number of apartments that are rented out is a random variable, X, with mean 20 and standard deviation 3. Monthly net income from the second property (a parking lot) is ninety percent of revenue (the management company takes the other ten percent), minus...

Jenny is a real estate investor who just sold an income property for a gain of...

Jenny is a real estate investor who just sold an income property for a gain of $200,000. The closing took place on February 1, 2019. Jenny plans to use the proceeds from this sale to immediately purchase a new income property that reliably generates $30,000 rental income each year. Once acquired, Jenny does not intend to make any renovations and/or changes to the new income property, and she plans to dispose of it in approximately ten years. Jenny does not...

An investor into the real estate mentioned to you that he/she wishes to purchase a property...

An investor into the real estate mentioned to you that he/she wishes to purchase a property for investment upon his/her graduation in about 3 years time. The property value he/she can afford are in the range of rm300,000. Evaluate the above in the perspective of time value of money.

Compute the cash flow, tax flow, and after tax flow for the following real estate investment...

Compute the cash flow, tax flow, and after tax flow for the following real estate investment property: -Gross rents are expected to be $36,000 per year -Expected vacancy allowance is 5% of gross rents -Property management fees are 8% of rents collected -Total estimated operating expenses per year $7,200 -Payment of mortgage per year: Interest 12,000 Principal 3,000 Total 15,000 -Depreciation allowance for the year is $14,350 -The owner's earned income is $100,000 and his marginal tax bracket is 30%...

A real estate investor wants to buy a property for $300,000 using an 80% LTV first-lien...

A real estate investor wants to buy a property for $300,000 using an 80% LTV first-lien mortgage loan. A lender offers a 30-year fully amortizing CPM loan at 6% with monthly repayments. The loan requires the borrower to pay an origination fee of $5,000 upfront. 1. How much would the lender actually disburse (net loan proceeds)? 2. What is the effective interest rate on the loan if the mortgage is paid off as originally scheduled? 3. If the investor prepays...

What are some ethical challenges in real estate and how the professional real estate investor and...

What are some ethical challenges in real estate and how the professional real estate investor and broker should effectively handle those ethical challenges?

You are presented with a real estate investment with cash flow in year 1 of $100,000,...

You are presented with a real estate investment with cash flow in year 1 of $100,000, increasing by $5,000 per year through year 5. And, you estimate you can sell the deal at the end of the 5th year for $1,250,000. If your discount rate is 12%, should you buy the deal at the $1,100,000 asking price? A) Yes, because the IRR is a positive 9.34% B) No, because the NPV is a negative $33,455 C) Yes, because the NPV...

A real estate agent has 12 properties that she shows. She feels that there is a...

A real estate agent has 12 properties that she shows. She feels that there is a 40% chance of selling any one property during a week. The chance of selling any one property is independent of selling another property. Compute the probability of selling at least 5 properties in one week. Round your answer to four decimal places.

An investor has just inherited $605,000. A local commercial real estate broker has presented her with...

An investor has just inherited $605,000. A local commercial real estate broker has presented her with the following opportunity to purchase a small office building for $1,500,000. There are four existing leases: A bank rents the 9,500 square feet on the first floor for $10,500 per month with level payments for three more years. Thereafter, the bank is expected to renew for 10 years at $12,000 per month. An insurance company rents 6,200 square feet on the second floor for...

Kate recently invested in real estate with the intention of selling the property one year from...

Kate recently invested in real estate with the intention of selling the property one year from today. She has modeled the returns on that investment based on three economic scenarios. She believes that if the economy stays healthy, then her investment will generate a 30 percent return. However, if the economy softens, as predicted, the return will be 10 percent, while the return will be -25 percent if the economy slips into a recession. 1) If the probabilities of the...

Subjects