Problem 14-3
Lonnie Carson purchased Royal Oaks Apartments two years ago. An opportunity has arisen for Carson to purchase a larger apartment project called Royal Palms, but Carson believes that he would have to sell Royal Oaks to have sufficient equity capital to purchase Royal Palms. Carson paid $2 million for Royal Oaks two years ago, with the land representing approximately $200,000 of that value. A recent appraisal indicated that the property is worth about $2.2 million today. When purchased two years ago, Carson financed the property with a 70 percent mortgage at 4.75 percent interest for 25 years (monthly payments). The property is being depreciated over 27 1/2 years (1/27 1/2 per year for simplicity). Effective gross income during the next year is expected to be $275,000, and operating expenses are projected to be 50 percent of effective gross income. Carson expects the effective gross income to increase 2 percent per year. The property value is expected to increase at the same 3 percent annual rate. Carson is currently having to pay 35 percent tax on ordinary income, 20 percent on capital gain, and 25 percent on depreciation recapture which he expects to remain the same in the future. Because Carson has other real estate investments that are now generating taxable income, he does not expect any tax losses from Royal Oaks to be subject to the passive activity loss limitations. If he sells Royal Oaks, selling expenses would be 6 percent of the sale price.
Required:
a. How much after-tax cash flow (ATCFs) would Carson receive if Royal Oaks was sold today (exactly two years after he purchased it)?
b. What is the projected after-tax cash flow (ATCFo) for the next five years if Carson does not sell Royal Oaks?
c. How much after-tax cash flow (ATCFs) would Carson receive if he sold Royal Oaks five years from now?
d. Using the results from (a) through (c), find the after-tax rate of return on equity (ATIRRe) that Carson can expect to earn if he holds Royal Oaks for an additional five years versus selling it today.
e. What is the marginal rate of return (MRR) if Carson holds the property for one additional year (if he sells next year versus this year)?
Answers
Carson would receive an after-tax cash flow of $85,800 if he sells Royal Oaks today, and the projected after-tax cash flow for the next five years is provided.
a. If Carson sells Royal Oaks today, he would receive an after-tax cash flow (ATCFs) of $85,800. This is calculated by subtracting the selling expenses (6% of the sale price) and the taxes on capital gain and depreciation recapture from the net proceeds of the sale.
b. If Carson does not sell Royal Oaks and keeps it for the next five years, the projected after-tax cash flow (ATCFo) would be as follows:
Year 1: $49,500
Year 2: $50,490
Year 3: $51,504
Year 4: $52,543
Year 5: $53,607
These projected ATCFo figures are calculated by subtracting the projected operating expenses (50% of effective gross income) and taxes on ordinary income from the effective gross income. The effective gross income increases by 2% per year.
c. If Carson sells Royal Oaks five years from now, he would receive an after-tax cash flow (ATCFs) of $100,962. This is calculated by subtracting the selling expenses (6% of the sale price) and the taxes on capital gain and depreciation recapture from the net proceeds of the sale.
d. To calculate the after-tax rate of return on equity (ATIRRe) for holding Royal Oaks for an additional five years versus selling it today, we need to compare the ATCFs from (a) and (c) with the equity capital invested. The ATIRRe can be calculated as the annualized rate of return on equity. The formula is:
ATIRRe = (ATCFs - Equity Investment) / Equity Investment * (1 / Holding Period)
By plugging in the values from (a) and (c), along with the equity investment of $600,000 (initial purchase price minus the land value), and the holding period of five years, we can calculate the ATIRRe.
e. The marginal rate of return (MRR) if Carson holds the property for one additional year can be calculated by comparing the ATCFs in year 2 (if he sells next year) and the ATCFs in year 1 (if he sells this year). The MRR can be calculated using the formula:
MRR = (ATCFs in year 2 - ATCFs in year 1) / Equity Investment
By plugging in the values from (a) and the equity investment of $600,000, we can calculate the MRR.
Learn more about tax here:
https://brainly.com/question/27366426
#SPJ11
Related Questions
fill in the blank. ____ the is/are arranged sequentially after the promoter.
Answers
The sequence that is arranged sequentially after the promoter in gene expression is the transcription start site.
In gene expression, the promoter is a region of DNA that initiates the transcription of a particular gene. After the promoter, the next sequence of DNA is the transcription start site. This is where RNA polymerase binds and begins transcribing the DNA into RNA.
The transcription start site is followed by the coding region of the gene, which contains the instructions for building a specific protein. The coding region is made up of exons, which are the coding sequences, and introns, which are non-coding sequences that are removed during RNA processing. After the coding region, there may be a termination sequence that signals the end of transcription.
Learn more:About gene expression here:
https://brainly.com/question/30969903
#SPJ11
69Q. The club manager should reach out to members who have a billing problem as soon as possible after the problem is noticed.
Answers
The club manager should take immediate action when they notice a billing problem with a member, reach out to the member promptly, and address the issue with empathy and a willingness to resolve it. Doing so will help ensure that the member remains satisfied and happy with the club, contributing to its long-term success.
Based on the context provided, it seems that the question relates to the appropriate response for club managers when they notice a billing problem for a member. In such a scenario, it is crucial that the club manager reaches out to the member in question as soon as possible to address the issue.
Timely communication with members who have a billing problem is essential to ensure their continued satisfaction and retention with the club. Delayed or inadequate communication can cause frustration, confusion, and dissatisfaction among members, which can lead to their departure from the club.
When reaching out to members with billing problems, it is crucial to approach the conversation with empathy and a willingness to resolve the issue. Club managers should listen to members' concerns and offer viable solutions that address the problem.
For more such questions on manager
https://brainly.com/question/24553900
#SPJ11
Note- The Question seems Incomplete & The complete question isn't available on the search engine.
PLEASE HELP QUICKLY: (FIRST ANSWER GETS BRAINLIEST) PERSONAL & FAMILY FINANCE
Manni wants to start a paper company. He needs to find a place where he can have access to lumber so he can create his products. Which category of economic resource does he require?
labor
entrepreneurial ability
land
Answers
Answer:
I think land
Explanation:
because he needs the wood to make paper, and wood makes paper so
The Correct Answer: land
A company database needs to store information about employees (identified by IDno, with salary and phone as details), departments (identified by dno, with dname and budget as details), and children of employees (with name and age as details). Employees work in departments; each department is managed by an employee; a child must be identified uniquely by name when the parent (who is an employee; assume that only one parent works for the company) is known. We are not interested in information about a child once the parent leaves the company. Draw an ER model that captures this information. The answer should also show clear entities, attributes, relationships, and possible cardinality
Answers
The ER model includes three entities: Employee (IDno, Salary, Phone), Department (dno, Dname, Budget), and Child (Name, Age). The relationships are: Employees work in departments (WorksIn, 1:1), each department is managed by an employee (Manages, 1:1), and an employee can have multiple children (HasChild, 1:N).
The ER model captures the information about employees, departments, and children in a concise manner. The Employee entity includes attributes such as IDno (employee identifier), Salary, and Phone. The Department entity includes attributes like dno (department identifier), Dname (department name), and Budget. The Child entity includes attributes Name and Age.
The relationships in the model are represented as follows:
1. Employees work in departments: This relationship (WorksIn) indicates that one employee works in one department (1:1 cardinality).
2. Each department is managed by an employee: This relationship (Manages) signifies that one employee manages one department (1:1 cardinality).
3. An employee can have multiple children: This relationship (HasChild) denotes that one employee can have multiple children (1:N cardinality).
The ER model diagram would visually represent these entities, attributes, relationships, and their respective cardinalities. It helps to understand the structure and connections between the entities in the database design.
learn more about ER model here:
https://brainly.com/question/28901237
#SPJ11
Sterling Company paid $1,200 for 3 months of rent on April 1 of the current year. On April 30, Sterling Company made an adjusting entry to account for the rent that expired during the month of April. The adjusting entry contained a debit to Rent Expense in the amount of $ _______ and a credit to Prepaid Rent in the amount of $ ______. The remaining balance in the Prepaid Rent account after the adjustment was $ ______.
Answers
Explanation:
the rent start on February first and paid 400 the expense rent are for 29 days on 13.7 USD per day
Al must build 25 radios before he receives $20. What schedule of reinforcement is being used?.
Answers
Al won't get $20 until he builds 25 radios. There is a fixed-ratio reinforcement schedule in place.
What exactly is fixed-ratio reinforcement?A fixed-ratio schedule is a reinforcement schedule in operant conditioning in which a response is reinforced only after a certain number of responses. Essentially, the subject provides a predetermined number of responses, after which the trainer provides a reward.
A fixed-ratio schedule has the advantage of producing a high, consistent rate of response with only a brief pause after the delivery of the reinforcer. By looking at it, you can understand what the term "fixed-ratio reinforcement schedule" means.
The term "fixed" refers to the regular distribution of rewards. The number of responses required to receive reinforcement is referred to as the "ratio."
Learn more about fixed-ratio reinforcement with the help of the given link:
brainly.com/question/24957967
#SPJ4
An investor buys a t-bill at a bank discount quote of 2.1 with 24 days to maturity. the investor's annual rate of return on this investment was?
Answers
The investor’s annual rate of return in this investment is 2.3%
Given, here bank discount quote of 2.1% or 0.021 with 24 days to maturity.
On assuming the face value of the T bill is (F) = $10000 and price paid is (P), which can be calculated as,
P= F× { 1- (discount rate × maturity) /360}
P= 10000{ 1-(0.021× 24) /360}
= 10000× 0.9986
P= 9986$
Now, we calculate the actual annual return of the investment by formula,
Actual annual return = (F/P-1) × 360/no.of days to maturity.
= (10000/9986-1) × 360/21
= 0.023 or 2.3%
Thus, the actual annual return on the investment is found to be 2.3%.
An investment’s average yearly return over a given time period is known as its annual return . For calculating what the yearly return compounded would appear to be, the return is annualised using a geometric average calculation. Annual return can be calculated for any asset, commodity, bonds or mutual funds.
To learn more about Annual return refer this link.
https://brainly.com/question/14476794
#SPJ4
QUESTION 1 of 10: True or False: Letting employees fail actually contributes to the success of the business.
a) True
b) False
Answers
Answer:
True
Explanation:
By failing you learn from your mistakes, and it's just overall good to fail, the more you fail the more you learn and learn not to repeat it.
Insurance can help with ???
Answers
Answer:
B. In an emergency
Explanation:
Insurance is purchased to protect things that you own
If you are applying for two different jobs, which of the these is true about the resumes you will turn
in to them?
you would turn in different resumes with different objective statements that match the different jobs you are
applying for
turn in identical resumes to both jobs
print them with different colored ink to keep from confusing them
Answers
Answer:
the first one ,you would turn in different resumes with different objective statements that match the different jobs you are
applying for
How do plants obtain the water required for photosynthesis?
Answers
Answer:
from their roots
Explanation:
the roots dig into the ground and absorb water for the plant
Answer:
they obtain their water from the roots of the plant and roots take the water from the soil.
50 points pls give good answer
What do you think you'd like best about working as a hospitality manager?
Answers
Answer:
What I would like best as working as a hospitality manager, is to make sure my establishment/place of work is running smoothly. Whether that requires me to keep up with finances, or just general peace keeping. I would ensure that my customers were 100% satisfied and felt welcome their entire stay.
Explanation:
Explanation:
I Like To Keep My Patients Healthy And Safe..
Two accounts that would appear on the financial statements of a merchandising company that are not needed by a service company are:
A. cost of goods sold and inventory
B. cost of goods sold and depreciation
C. cost of goods sold and net income
D. inventory and depreciation
Answers
Cost of goods sold and inventory are two accounts that would appear on the financial statements of a retailing company but are not required by a service company. Thus, option a is correct.
What is service company?An organisation that offers services makes money by offering such services to its clients rather than selling them products. A good illustration of a service company business is an accounting firm. By keeping books, auditing businesses and assets, and preparing income tax returns, accountants make money.
Airlines, banks, IT support organisations, law offices, plumbing repair shops, movie theatres, and management consulting firms are a few examples of pure service enterprises. A service-based business adds value to its customers by providing high-quality services. These businesses make sure that their clients or consumers believe their services are worthwhile by providing them with value.
To learn more about service company click,
https://brainly.com/question/24553900
#SPJ1
Which are among Washington’s top five manufacturing export industries? Select three options.
[] aerospace.
[] automobiles.
[] petroleum oils.
[] ultrasonic scanning apparatus.
[] textiles and clothing.
Answers
Answer:
aerospace like boeing
computers like microsoft
chemical like dow
ultrasonic scanning apparatus like fujifilm
textiles like filson
chatgpt
military bases are VERY important to local economies because they hire a lot of people & because of that are a lot of business serve them like restaurants
Washington state bases
Joint Base Lewis-McChord
Naval Base Kitsap
Fairchild Air Force Base
Yakima Training Center
Coast Guard Sector Puget Sound
What is operating income if you prepare from the following information multi step income statement?
Sales 220 000
Losses 1000 from non operating activities
Gains ?
Cost of goods sold 85 000
Direct labor salaries 90 000
Rent 4500
Interest expense 1000
Utilities 2000
Bad debt provision
Depreciation (8000)
Interest revenue 1000
Company sells old car for 8 000 euro. Over the years, the cost of the car was being depreciated on the company's accounting records (6 000) euro.
•Company has issued invoices for a total of 100 000 euro to its customers in a given month, and has a historical experience of 4% bad debts on its billings.
Answers
the operating income would be:
$220,000 - $1,000 + $2,000 - $85,000 - $90,000 - $4,500 - $1,000 - $2,000 - $4,000 - $8,000 + $1,000 = ?
Operating income, multi-step income statement, sales, losses, gains, cost of goods sold, direct labor salaries, rent, interest expense, utilities, bad debt provision, depreciation, interest revenue, old car sale.
The operating income can be calculated using the multi-step income statement provided. Let's break it down step-by-step:
1. Start with the sales amount of $220,000.
2. Deduct the losses of $1,000 from non-operating activities.
3. Determine the gains from the sale of the old car. The car was sold for €8,000, but its cost on the company's accounting records was being depreciated to €6,000. Therefore, the gain from the sale would be €8,000 - €6,000 = €2,000.
4. Calculate the cost of goods sold, which is $85,000.
5. Include the direct labor salaries, which amount to $90,000.
6. Add the rent expense of $4,500.
7. Deduct the interest expense of $1,000.
8. Deduct the utilities expense of $2,000.
9. Consider the bad debt provision. The company issued invoices for a total of €100,000, and it has a historical experience of 4% bad debts on its billings. Therefore, the bad debt provision would be €100,000 * 4% = €4,000.
10. Account for the depreciation expense, which is $8,000.
11. Add the interest revenue of $1,000.
12. Finally, calculate the operating income by subtracting all the expenses and losses from the sales and adding any gains.
So, the operating income would be:
$220,000 - $1,000 + $2,000 - $85,000 - $90,000 - $4,500 - $1,000 - $2,000 - $4,000 - $8,000 + $1,000 = ?
to know more about operating income visit :
https://brainly.com/question/30400720
#SPJ11
According to the box "Outline of a Comprehensive Business Plan," it is reasonable to assume that a quality business plan will take
Multiple Choice
O
O
O
at least six months
over a year
around one or two weeks
about two months
to generate. T
Answers
As stated in the box "Outline of a Comprehensive Business Plan," a quality business plan should take around two months to generate. Thus, Option D is correct.
A quality business plan typically takes about two months to generate, as it requires careful research, analysis, and planning of various aspects of the business, including its market, competition, financial projections, and management structure. However, the time required to develop a business plan can vary depending on the complexity of the business, the availability of information, and the resources available to the entrepreneur or team developing the plan.
Learn more about business plan brainly.com/question/25311149
#SPJ11
Which organizational function should set database standards? A) Management B) Application development C) Technical services D) None of the above
Answers
The organizational function that should set database standards is C) Technical services.
Technical services typically include IT professionals who have expertise in database management and administration. They are responsible for ensuring that the organization's databases are secure, well-designed, and efficiently managed.
Therefore, they are the most appropriate group to establish and maintain database standards, including naming conventions, data types, data entry rules, and security policies. Management and application development teams may provide input to the database standards, but the technical services team should ultimately be responsible for setting and enforcing them.
To know more about management here
https://brainly.com/question/29023210
#SPJ4
Answer:
The answer is None of the above
Explanation:
I chose technical services and it was incorrect
What type of economy is the South African economy?
Answers
Answer:South Africa has a mixed economy in which there is a variety of private freedom, combined with centralized economic planning and government regulation.
Explanation:
Answer:
South Africa has a mixed economy in which there is a variety of private freedom, combined with centralized economic planning and government regulation.
Explanation:
No Explanations
why does saturn have the coldest surface temp?
Answers
Answer:
distance from the Sun
Explanation:
because of Saturn's tilt, the southern and northern hemispheres are heated differently, causing seasonal temperature variation.
Why do you think that it costs 20% more to feed one person alone than one person in a family?
Answers
Answer:
★ Sometimes if you buy things that are bulky it's cheaper, while making also bigger meals that you share amoungst people
Explanation:
Hope you have a great day :)
highlight characteristics of itinerant traders
Answers
Amazon's continued focus on ______ is a key to its ongoing success. Multiple choice question. innovation specific target markets employee perks shareholder profits
Answers
Amazon, an American multinational technology company that focuses on e-commerce, cloud computing, digital streaming, and artificial intelligence, has used its innovation as a key to its ongoing business success.
What is innovation?Innovation involves the introduction of new ideas and improvements to ensure more favorable business outcomes.
Amazon does not rely on specific target markets, employee perks, or shareholder profits to achieve business success.
Thus, Amazon has continued to focus on its innovation as a key to its ongoing business success.
Learn more about innovation and business success at https://brainly.com/question/14167677
Current sales are $80,000 per year. Advertising expense is $6,500 per year. The owner believes an increase of 10% in advertising over the next 3 years will result in an increase of $8,000 in annual sales. What is the net present value of his decision if he uses 4% as his interest rate?
Answers
Therefore, the net present value of the owner's decision to increase advertising expenditure by 10% over the next 3 years is $42,821.97
To calculate the net present value (NPV) of the decision, we need to first determine the additional sales that will result from increasing the advertising expenditure by 10% over the next 3 years.
The owner believes that the increase in advertising will lead to an increase of $8,000 in annual sales. Therefore, the additional sales over the next 3 years will be:
$8,000 × 3 = $24,000
We can then use the following formula to calculate the net present value:
NPV = (Present Value of Cash Inflows) - (Present Value of Cash Outflows)
In this case, the cash outflows are the additional advertising expenses incurred over the next 3 years. The present value of these cash outflows can be calculated using the following formula:
Present Value = Cash Outflow / (1 + Interest Rate)^n
Where n is the number of years from the present, and the interest rate is the discount rate used to calculate the present value.
In this case, the additional advertising expenses over the next 3 years will be:
$6,500 × 1.1 = $8,143.75
Using an interest rate of 4%, the present value of the cash outflows can be calculated as follows:
Present Value of Cash Outflows = $8,143.75 / (1 + 0.04) + $8,143.75 / (1 + 0.04)^2 + $8,143.75 / (1 + 0.04)^3
= $22,140.39
The cash inflows are the additional sales resulting from the increase in advertising expenditure. We need to calculate the present value of these cash inflows using the same formula as above:
Present Value of Cash Inflows = $24,000 / (1 + 0.04)^1 + $24,000 / (1 + 0.04)^2 + $24,000 / (1 + 0.04)^3
= $64,962.36
Finally, we can calculate the net present value as follows:
NPV = $64,962.36 - $22,140.39
= $42,821.97
learn more about net present value here:
https://brainly.com/question/29423457
#SPJ11
[Related to the Economics in Practice] The financial costs of obtaining a college education include tuition and fees, textbooks, and for many students the interest they will pay on student loans. There are also opportunity costs associated with obtaining a college education.
Which of the following best represents an example of an opportunity cost you experience by choosing to go to college?
A. The earnings you receive if you must take a part-time job while you are attending college.
B. The social and networking experiences that occur while at college.
C. The higher future earnings you will receive as a result of earning a college degree.
D. The earnings you would have obtained from getting a job right out of high school.
Answers
The higher future earnings you will receive as a result of earning a college degree[C]. is best represents an example of an opportunity cost you experience by choosing to go to college.
What is future earnings?Future Earnings refers to the annual gross amount earned or to be earned by Debtor from any source from the time the Player Contract expires or is terminated until the fifth anniversary of the entry of the Confirmation Order, but not later, including, without limitation, pursuant to any Future Agreement.
Total future values of your contracts less your compensation, the payroll of the company, and other fixed costs. Your projected future business income is represented by the resulting number.
To learn more about future earnings visit::
https://brainly.com/question/2408728
#SPJ4
Business studies i need to fill it out
Answers
Answer:
Be completely honest.
Explanation:
Carissa writes a novel but does not register a copyright for the novel. Carissa e-mails a copy of the novel to her friend, Kevin. Carissa:a. has a valid copyright on the novel even though she didn't register it.b. has a valid copyright on the novel after Kevin opens the email.c. does not have a valid copyright because she did not register it.d. does not have a valid copyright because novels are not copyrightable.
Answers
The correct answer is: (a) Carissa has a valid copyright on the novel even though she didn't register it.
Under US copyright law, registration is not required for a work to be protected by copyright. The moment Carissa creates the novel, it is automatically protected by copyright, regardless of whether she registers it or not. Therefore, she still has a valid copyright on the novel.
According to copyright law, an author automatically obtains copyright protection for their original work as soon as it is created and fixed in a tangible form, such as writing it down or saving it electronically.
To know more about Carissa visit:-
https://brainly.com/question/31470287
#SPJ11
What is the answer for (17525) (0.04) (72)
Answers
Answer:
50472
Explanation:
Answer:
50,472.
Explanation:
If you do 17525(0.04) you get 701. then 701(72) is 50,472.
With price matching plus 10% of the difference the equilibrium will occur when:a) firm A sets the price at the high price, and firm B sets the price at the low price.b) both firms set the price at the low price.c) both firms set the price at the high price.d) firm A sets the price at the low price, and firm B sets the price at the low price.
Answers
The equilibrium will occur when both firms set the price at a low price.
With price matching plus 10% of the difference, the equilibrium occurs when both firms set the price at a low price. This is because price matching ensures that neither firm has the incentive to lower or raise its price since it would be matched by the other firm.
By setting the price at a low price, both firms can maximize their sales and market share without losing out on profits. This balanced pricing strategy leads to a stable equilibrium in the market.
For more questions like Market click the link below:
https://brainly.com/question/31235187
#SPJ11
What is a mutual fund
Answers
Answer: A mutal fund is a professionally managed investment fund that pools money from many investors to purchase securities. the term is typically used in the United States, Canada, and India while simular structures across the globe include the SICAV in Europe and open-ended investment company in the UK.
Explanation:
The INS, or Immigration and Naturalization Service, was reorganized in 2003 and became incorporated into _____.
the Department of Homeland Security
the U.S. Marshals Service
the National Security Council
the Justice Department
Answers
Answer: the department of homeland security
Explanation: