Consider the following information: Purchase Price: 750,000 financed 80% at 7% rate of interest for 25 years (amortized monthly) Remaining Aftertax Cash Flow from Operations  year 1: $33,000 Remain
Consider the following information:
 Purchase Price: 750,000 financed 80% at 7% rate of interest for 25 years (amortized monthly)
 Remaining Aftertax Cash Flow from Operations  year 1: $33,000
 Remaining Aftertax Cash Flow from Operations  year 2: $22,000
 Remaining Aftertax Cash Flow from Operations  year 3: $31,000
 Remaining Aftertax Cash Flow from Operations  year 4: $28,000
 Remaining Aftertax Cash Flow from Operations  year 5: $26,000
 Remaining Aftertax Cash Flow from Operations  year 6: $30,000
 Remaining Aftertax Cash Flow from Operations  year 7: $32,000
 Calculate the owner's equity (round to nearest dollar).
 Calculate the financed amount (round to nearest dollar).
 Scenario A: The investor decides to sell the property at the end of year 4 for $900,000. Calculate the loan payoff at the point of sale (this is a balloon payment calculation)  round answer to the nearest dollar.
 Calculate the IRR under Scenario A (round to tenth of a percent).
 Scenario B: The investor decides to sell the property at the end of year 7 for $1,100,000. Calculate the loan payoff at the point of sale (this is a balloon payment calculation)  round answer to the nearest dollar.
 Calculate the IRR under Scenario B (round to tenth of a percent).
 Which alternative Scenario A or Scenario B is probably the most desirable?
Apr 19 2021 View more View Less
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