Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are looking at the following projects and need to decide how best to deploy an inheritance you received of $150,000. Using the information below,

You are looking at the following projects and need to decide how best to deploy an inheritance you received of $150,000. Using the information below, determine the following ratios. You may use an excel spreadsheet to complete a comprehensive review of each of the properties below.

Once you have completed the ratios, you are to determine which property would be the best option. Support your answer in a report using appropriate ratios and any other relevant factors you deem necessary. Gross Income Multiplier Net Income Multiplier Operating Ratio Break Even Debt Coverage Ratio Overall Cap Rate Equity Dividend Rate Cash on Cash Return Present Value of Cash Flows Net Present Value Profitability Index Investment Value Internal Rate of Return

Which option would you select given the following factors: Annual Growth Rate: 4% Required Rate of Return: 8% Tax Rate: 15% Equity Available: $150,000 Loan Rate: 4% Holding Period: 12 Years Annual Price Appreciation: 3.5% per year

Units Sales Price Avg Revenue Per Unit/Month Annual Operating Expenses (Interest not included) Duplex 2 $ 125,000.00 $ 615.00 $ 6,642.00 Duplex #2 2 $ 105,000.00 $ 575.00 $ 6,210.00 Fourplex 4 $ 245,000.00 $ 850.00 $ 22,160.00 Apartment Building #1 16 $ 600,000.00 $ 600.00 $ 69,840.00 Apartment Building #2 32 $ 1,200,000.00 $ 695.00 $ 162,096.00 Single Family Home #1 1 $ 189,000.00 $ 1,750.00 $ 11,010.00 Single Family Home #2 1 $ 215,000.00 $ 2,000.00 $ 13,400.00 For this example, we will not consider the vacancy rate for now.

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

Auditing And Assurance Services Plus Pearson MyLab Accounting With Pearson EText

Authors: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan

17th Global Edition

1292312106, 978-1292312101

More Books

Students also viewed these Accounting questions