A Client Has Requested Advice on a Potential Investment Opportunity

question 21

Multiple Choice

A client has requested advice on a potential investment opportunity involving an income producing property.She would like you to determine the internal rate of return of the
Investment opportunity based on the following information.Expected Holding Period: 5 years;End of first year NOI estimate: $113,900;NOI estimates in subsequent years will grow by 5% per year;Price at which the property is expected to be sold at the end of year 5: $1,615,205.22;Current market price of the property: $1,475,667.71.

• A)-15.30%
• B)8.60%
• C)9.86%
• D)10.00%

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Definitions:

Controlling Operations

This refers to the process of monitoring, managing, and adjusting a company's or organization's operations to meet set goals and objectives.

Nonoperating Assets

Nonoperating assets are assets that are not essential to the primary business operations and may include investments, unused land, or other assets held for future use.

Operating Assets

Assets used by a business in its day-to-day operations to generate revenue, such as machinery, buildings, and inventory.

Return On Investment

A measure used to evaluate the efficiency of an investment or compare the efficiencies of several different investments, calculated as net profit divided by the cost of the investment.