Suppose you have developed the following information for a potential investment:

Question

Suppose you have developed the following information for a potential investment: current market value is $1,000,000; anticipated loan to value ratio is 0.75 with two discount points; and predicted cash flows of ATCF1 = 38,560, ATCF2 = $41,780, ATCF3= $45,210, and ATER3= $201,730. Assume the investor's minimum required after-tax rate of return is 15%.

What is the cash flow at acquisition (original cost to the investor)?

Question 19 options:

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1) $250,000 2) $235,000 3) $265,000 4) none of the above

Explanation / Answer

The prsent value of after tax cash flow are

=(38560/11.15^1)+(41780/1.15^2)+(45210/1.15^3)+(201730/1.15^4)=$243,502

option 4:None of the above

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