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found part A; need parts B and C An investor has projected three possible scenarios for a project as follows: Pessimistic-NO/ will be $290,000 the
found part A; need parts B and C
An investor has projected three possible scenarios for a project as follows: Pessimistic-NO/ will be $290,000 the first year, and then decrease 2 percent per year over a five-year holding period. The property will sell for $2.16 million after five years. Most likely-NO/ will be level at $290,000 per year for the next five years (level NON and the property will sell for $2.90 million. Optimistic-NOI will be $290,000 the first year and increase 3 percent per year over a five-year hoiding period. The property will then sell for $4.00 million. The asking price for the property is $2.90 million. The investor thinks there is about a 30 percent probability for the pessimistic scenario, a 40 percent probability for the most likely scenario, and a 30 percent probability for the optimistic scenario. Required: a. Compute the IRR for each scenario. b. Compute the expected IRR. c. Compute the variance and standard deviation of the IRRs. Compute the IRR for each scenario, (Do not round intermediate calculations. Round your answers to 2 decimal places.) Complete this question by entering your answers in the tabs below. Compute the expected IRR. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Compute the variance and standard deviation of the IRRs. (Do not round intermediate calculations. Round "Variance" to 4 decimal places and "Standard deviation" to 2 decimal places.) Step by Step Solution
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