Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

pls help! An investor is considering the acquisition of a distressed property which is on Northlake Bank's REO list. The property is avallable for $203,800

pls help!
image text in transcribed
image text in transcribed
image text in transcribed
An investor is considering the acquisition of a "distressed property" which is on Northlake Bank's REO list. The property is avallable for $203,800 and the investor estimates that he can borrow $160,000 at 4.5 percent interest and that the property will require the following total expenditures during the next year: Required: a. The investor is wondering what such a property must sell for after one year in order to earn a 20 percent return (IRR) on equity. b. The lender is now concerned that if the property does not sell, investor may have to carry the property for one additional year. He believes that he could rent it (starting in year 2) and realize a net cash flow before debt service of $2,340 per month. However, he would have to make an additional $8,340 in interest payments on his loan during that time, and then sell. What would the price have to be at the end of year 2 in order to earn a 20 percent IRR on equity? The investor is wondering what such a property must sell for after one year in order to earn a 20 percent return (IRR) on equity. Note: Do not round intermediate calculations. Round your final answer to nearest whole dollar amount. The lender is now concerned that if the property does not sell, investor may have to carry the property for one additional year: He believes that he could rent it (starting in year 2 ) and realize a net cash flow before debt service of $2,340 per month. However, he would have to make an additional \$8,340 in interest payments on his loan during that time, and then sell. What would the price have to be at the end of year 2 in order to earn a 20 percent IRR on equity? Note: Do not round intermediate calculations. Round your final answer to nearest whole dollar amount

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Monetary Policy Strategy

Authors: Frederic S. Mishkin

1st Edition

0262513374, 978-0262513371

More Books

Students also viewed these Finance questions

Question

e . What is the average work - in - process inventory?

Answered: 1 week ago

Question

Classify delivery styles by type.

Answered: 1 week ago