Question
QUESTION. Thumbs up guaranteed! What are your Returns on Equity (ROE) per year and Income per year in each of the following investment scenarios? Ignore
QUESTION. Thumbs up guaranteed!
What are your Returns on Equity (ROE) per year and Income per year in each of the following investment scenarios? Ignore tax and depreciation. Please fill out ??? with the correct calculations.
| Total Equity Investment | $300,000 | |||||
| Cost per House | $300,000 | |||||
| ROA: | 7% | ? | ? | ? | ||
| Cost of Debt | 3% | |||||
| Scenario #1 | Scenario #2 | Scenario #3 | Scenario #4 | |||
| # of Rental Houses Bought | 1 | 2 | 4 | 5 | ||
| Multiplied by | ||||||
| $300,000 per House = | $300,000 | $600,000 | $1,200,000 | $1,500,000 | ||
| Amount of Mortgage on Each House | 0 | $150,000 | $225,000 | $240,000 | ||
| Total Amount of Mortgage Debt | 0 | $300,000 | $900,000 | $1,200,000 | ||
| Bal Sheet Accounting Equation | ||||||
| Total Assets | $300,000 | $600,000 | $1,200,000 | $1,500,000 | ||
| equal (=) | ||||||
| Total Liabilities | 0 | ? | ? | ? | ||
| plus (+) | ||||||
| Total Equity | $300,000 | ? | ? | ? | ||
| Abbrev. Inc Statement | ||||||
| Operating Income (Assets x ROA) | $21,000 | ? | ? | ? | ||
| minus (-) | ||||||
| Cost of Debt ( x total mortgage amount) | $0 | ? | ? | ? | ||
| equals (=) | ||||||
| Net Income | $21,000 | ? | ? | ? | ||
| ROE: | 7.00% | ? | ? | ? | ||
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Strategy, Value And RiskThe Real Options Approach
Authors: J. Rogers
2nd Edition
0230577377, 9780230577374
