Given the Following Information Regarding an Income Producing Property,determine the Internal

question 26

Multiple Choice

Given the following information regarding an income producing property,determine the internal rate of return (IRR) using levered cash flows.Expected Holding Period: 5 years;1^st year Expected NOI: $89,100;2^nd year Expected NOI: $91,773;3^rd year Expected NOI: $94,526;4^th year Expected NOI: $97,362;5^th year Expected NOI: $100,283;Debt Service in each of the next five years: $58,444;Current Market Value: $885,000;Required equity investment: $221,250;Net Sale Proceeds of Property at end of year 5: $974,700;Remaining Mortgage Balance at end of year 5: $631,026.

• A)10.6%
• B)12.2%
• C)22.9%
• D)33.4%

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Definitions:

Expectancy Theory

A theory in psychology that explains the process individuals undergo to make decisions based on the expected outcomes of their actions.

Incentive System

A method or plan used to motivate individuals or groups towards achieving certain performance goals.

Performance Targets

Specific goals set by a business to gauge and improve employee or organizational performance.

Value-based Management

A management philosophy that focuses on creating value for shareholders and stakeholders through effective decision-making and strategic focus.