The owner of an office building is interested in selling the building in order to raise capital for development of a large shopping mall. The building has a 30-year, 7% mortgage with 20 years of remaining payments; the original mortgage principal was $200 million. The building is fully occupied by tenants who have long-term leases of at least 20 years. The owner enjoys net income of $1 million per month after paying all operating expenses and the mortgage payment. The new owner would be able to take over the existing mortgage. a. What is the minimum offer that the owner would accept, assuming th

Answers

Answer 1

Answer:

Answer:

the minimum price depends on the owner's discount rate. For example, if the discount rate is 12% per year or 1% per month, then the price should equal:

PV = $1,000,000 x 90.81942 (PVIFA, 1%, 240 periods) = $90,819,420

You would need to adjust the PVIFA depending on the owner's discount rate; the higher the rate, the lower the price.

Related Questions

Should the home country be "large" relative to the world, its imposition of a tariff on imports would lead to an increase in domestic welfare if the terms-of-trade effect exceeds the sum of the:_________a. revenue effect plus redistribution effect. b. protective effect plus revenue effect. c. consumption effect plus redistribution effect. d. production distortion effect plus consumption distortion effect. e. None of the above.
Bruce Corporation makes four products in a single facility. These products have the following unit product costs: Products ABCD Direct materials$13.20$9.10$9.90$9.50 Direct labor 18.30 26.30 32.50 39.30 Variable manufacturing overhead 3.20 1.60 1.50 2.10 Fixed manufacturing overhead 25.40 33.70 25.50 36.10 Unit product cost$60.10$70.70$69.40$87.00 Additional data concerning these products are listed below. Products ABCD Grinding minutes per unit 2.70 3.40 3.20 2.30 Selling price per unit$75.00$92.40$86.30$103.10 Variable selling cost per unit$1.10$0.10$2.20$0.50 Monthly demand in units 2,900 2,900 1,900 2,100 The grinding machines are potentially the constraint in the production facility. A total of 52,600 minutes are available per month on these machines. Direct labor is a variable cost in this company. How many minutes of grinding machine time would be required to satisfy demand for all four products
If any, which of the following statements is FALSE?A. NPV measures the value created by taking on an investmentB. NPV indicates how much a project will improve owner wealthC. NPV is the discounted present value of a project's expected future accounting net income at the required return, subtracting the initial investmentD. None of the above statements is false
Your company has money to invest in an employee benefit plan and you have been chosen to be the plan's trustee. As an employee you want to maximize the interest earned on this investment and have found an account that pays 10% compounded continuously. Your company is providing you with $ 1,500 per month to put into your account for 10 years. What will be the balance in this account at the end of the 10-year period
as students, what plan can you suggest to prevent the spread of these observable practices in your community

The ease with which resources can be adjusted in response to changes in demand, technology, products and services, and resource availability is known as:

Answers

Answer:

Process flexibility.

Explanation:

The ease with which resources can be adjusted in response to changes in demand, technology, products and services, and resource availability is known as process flexibility.

Process flexibility simply refers to the ability of a firm or company to respond to changes in the production line or manufacturing process of goods to meet the needs of their customers.

For instance, when there is a new technology in the industry, the ability of a company to switch with ease is its process flexibility.

James, Inc., has purchased a brand new machine to produce its High Flight line of shoes. The machine has an economic life of 5 years. The depreciation schedule for the machine is straight-line with no salvage value. The machine costs $540,000. The sales price per pair of shoes is $77, while the variable cost is $29. Fixed costs of $245,000 per year are attributed to the machine. The corporate tax rate is 22 percent and the appropriate discount rate is 9 percent. What is the financial break-even point? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16)

Answers

Answer:

3,074 units sold or total revenue of $236,698 per year

Explanation:

cost of machine $540,000

depreciation expense per year = $540,000 / 5 = $108,000

contribution margin per unit sold = $77 - $29 = $48

we generally calculate the financial break even point of a business by using the following formula:

= EBIT × (1 - interest expense) × (1 - tax rate) - preferred dividends

But when we are dealing with projects, the financial break even point is the sales level at which the project's NPV = $0. If the sales level is lower, then the project will be rejected, and if the sales level is higher, then it should be accepted.

using an annuity formula, the free cash flow per year needed for the NPV = $0 is $540,000 / 3.8897 (PV annuity factor, 9%, 5 periods) = $138,828.19

$138,828.19 = {[(unit sales x $48) - $108,000] x 0.78} + $108,000

$30,828.19 = [(unit sales x $48) - $108,000] x 0.78

$39,523.32 = (unit sales x $48) - $108,000

$147,523.32 = unit sales x $48

unit sales = $147,523.32 / $48 = 3,073.40 units ≈ 3,074 units sold

Final answer:

The financial break-even point is approximately 5,104 units.

Explanation:

The financial break-even point can be calculated by determining the number of units that need to be sold in order to cover the fixed costs. First, we need to calculate the contribution margin per unit, which is the sales price per unit minus the variable cost per unit. In this case, it is $77 - $29 = $48. Next, we divide the fixed costs by the contribution margin per unit to find the break-even point in units. Using the formula: Break-even point (in units) = Fixed costs / Contribution margin per unit. Plugging in the numbers, we get: $245,000 / $48 = 5,104.17. Therefore, the financial break-even point is approximately 5,104 units.

Learn more about Financial break-even point here:

brainly.com/question/31504531

#SPJ11

Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 50,000 units of RX5 follows. Direct materials $ 5.00 Direct labor 9.00 Overhead 10.00 Total costs per unit 24.00 Direct materials and direct labor are 100% variable. Overhead is 70% fixed. An outside supplier has offered to supply the 50,000 units of RX5 for $19.00 per unit. Required: 1. Calculate the incremental costs of making and buying component RX5.

Answers

Answer:

The incremental costs of making and buying component RX5 is $100,000

Explanation:

For computing the increment cost of making and buying component RX5, first we have to compute the cost of making and buying component RX5 separately.

Cost of making includes:

Direct Material = 50,000 × $5 = $250,000

Direct Labor = 50,000 × 9 = $450,000

Variable Overhead cost = 50,000 × 10 × 30% = $150,000

So, total cost of making = Direct material cost + direct labor cost + variable overhead cost

= $250,000 + $450,000 + $150,000

= $850,000

Now, the cost of buying component is equals to

= units × RX5 per unit

= 50,000 × $19

= $950,000

So, the incremental costs of making and buying component RX5 is equals to

= cost of making - cost of buying component

= $950,000 - $850,000

= $100,000

Hence, the incremental costs of making and buying component RX5 is $100,000

Final answer:

The incremental cost of making component RX5 is $5.00 per unit.

Explanation:

To calculate the incremental costs of making and buying component RX5, we need to compare the cost of making the component in-house versus buying it from an outside supplier. The incremental cost of making the component is the difference between the current cost per unit to manufacture and the cost offered by the supplier. Here's how to calculate it:

Incremental cost of making = Total costs per unit - Cost offered by the supplier
Incremental cost of making = $24.00 - $19.00
Incremental cost of making = $5.00 per unit

The incremental cost of making component RX5 is $5.00 per unit.

Learn more about Cost here:

brainly.com/question/33292944

#SPJ3

Supply has the potential to contribute to: ___________a. Cost management, profitability, return on assets, competitive position and corporate social policy. b. Cost management, profitability, return on assets and competitive position. c. Cost management, profitability and return on assets. d. Cost management and profitability. e. Cost management.

Answers

Answer: Cost management, profitability, return on assets, competitive position and corporate social policy

Explanation:

Supply has the potential to contribute to cost management, profitability, return on assets, competitive position and corporate social policy.

Supply is defined as the amount of goods or services that a supplier is willing to offer for sale at a particular price and at a certain period. The amount of goods offered can determine the revenue generated and hence the profit made.

Please Help me, with this question for one of my class discussions. Think of a product and describe the stages of production the product goes through.

Answers

Answer:

Well, it depends on the product. But, I'd say, first, an idea for the product. Creating/designing and refining the product is next. Then, when finally satisfied, begin mass production

Explanation:

Lacy's Linen Mart uses the average cost retail method to estimate inventories. Data for the first six months of 2021 include: beginning inventory at cost and retail were $64,500 and $123,000, net purchases at cost and retail were $315,000 and $483,000, and sales during the first six months totaled $493,000. The estimated inventory at June 30, 2021, would be:

Answers

Answer:

Best estimate for inventory =$70,764.85

Explanation:

The closing inventory value at retail

= (Opening inventory + Purchases - sales) all in retail prices

= $123,000 + $483,000 - 493,000.

= 113000

Closing inventory value at cost

=113,000 × (64,500 + 315,000)/(123,000 + $483,000)

=70,764.85

Best estimate for inventory =$70,764.85

Other Questions

Suppose that you are obtaining a personal loan from your uncle in the amount of $30,000 (now) to be repaid in three years to cover some of your college expenses. If your uncle usually earns 9% interest (annually) on his money, which is invested in various sources, what minimum lump-sum payment three years from now would make your uncle satisfied with his investment?

Ash is the preferred wood to be used in the production of baseball bats. If a company was to buy the rights to harvesting the ash trees out of all the forests in North America, which of the following barriers of entry has this company created? A. problems raising capital B. patents and copyright law C. control of resources D. economies of scale E. licensing

FarCry Industries, a maker of telecommunications equipment, has 6 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 10 thousand bonds. If the common shares are selling for $27 per share, the preferred shares are selling for $15 per share, and the bonds are selling for 119 percent of par ($1,000), what weight should you use for debt in the computation of FarCry's WACC?

AAA Hardware uses the LIFO method to value its inventory. Inventory at the beginning of the year consisted of 16,000 units of the company’s one product. These units cost $10 each. During the year, 66,000 units were purchased at a cost of $13 each and 67,000 units were sold. Near the end of the fiscal year, management is considering the purchase of an additional 8,000 units at $13.a. What would be the effect of this purchase on income before income taxes? b. What would be the effect of this purchase on income before income taxes using FIFO method?