Question
Business finance.The following example are using real market information. A foreign investor from China is considering to purchase a condo located in the central of
Business finance.The following example are using real market information. A foreign investor from China is considering to purchase a condo located in the central of Hua Hin within 500m from Hua Hin night market and 600m from Hua Hin Beach. This Condo project is still under construction and expected to finish the construction and transfer to the buyer at 31 Dec 2020. She is experiencing hard capital budgeting, which is under 6,000,000THB. However, she only considering buying one unit within the hard budgeting. The Units she is interested are on the same floor. Unit B2 is 40 square meters, Unit A1 is smaller with 30 square meters. Both of the units are facing the garden and tropical swimming pool. The details of the payments and price are given as below. Other information related to the decisions are as below: The customer plans to hold the unit for five years then sell it on the market.Based on past experience and information, the rental income of Unit A1 is expected to be 20,000THB per month with 9 months guaranteed. The rental income of Unit B2 is expected to be 25,000THB per month with 9 months guaranteed. The common fee is 50 THB per square meter per month. The average expected rate of return in China on the market is 5%. According to the past property market performance, similar condo unit in Hua Hin is expected to increase 8%. To simplify the computation, rental income is assumed to have zero increase. Rental income and common fees are all paid at year end. Other transaction fees are ignored. Requirement: 1. UsetheNPVmethodtohelpyourcustomertodeterminewhichunitisabetter investment assuming that the customer is going to hold the condo for five year. 2. Use Internal Rate of return to help your customer to decide which unit is a better investment option 3. Use Profitability Index method to help your customer to decide which unit is a better investment option. 4. Use the discounted payback method to help your customer to decide which unit is a better investment option. 5. Compare and discuss the advantages and disadvantages of the above four methods.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started