Description
please find attached file
Assume you are Claire and are trying to determine if the Mount Hope shopping mall is a good investment of your $6.5 million inheritance, using a 20-year period. Assume operation of the facility begins in year 2 and the equity is utilized in year 1.
Determine the:
- Gross annual revenue
- Annual Maintenance Costs
- Net Annual Revenue
- Estimated Annual Debt Service
- Estimated Annual Profit
- Net Present Value of Claire’s investment, if the discount rate = 9%
Internal Rate of Return for the project investment
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Explanation & Answer
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Inheritance
Loan
Loan interest (p.a)
Period
Rental space (SF)
Rental revenue ($/SF)
Maintenance cost (p.a)
$
6,500,000.00
$ 25,330,000.00
7.50%
20years
150,000.00
$
30.00
$
636,680.00
1
2
Bal b/f
$ 25,330,000.00 $ 27,229,750.00 $
Interest (7.5%)
$
1,899,750.00 $
2,042,231.25 $
Est. Annual Debt Service (Bal
$ c/d)
27,229,750.00 $ 29,271,981.25 $
Gross Revenue
Finance cost
1,899,750.00
Net Annual Revenue
(1,899,750.00)
Maintenance & Operating Cost
Est. Annual Profit/(loss)
(1,899,750.00)
Period
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Cash flows ($)
(31,834,000.00)
(1,899,750.00)
1,821,088.75
1,667,921.41
1,503,266.51
1,326,262.50
1,135,983.19
931,432.93
711,541.40
475,158.0...