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You are looking at the following projects and need to decide how best to deploy an inheritance you received of $150,000. Using the information below, determine the following ratios. You may use an excel spreadsheet to complete a comprehensive review of each of the properties below. Once you have completed the ratios, you are to determine which property would be the best option. Support your answer in a report using appropriate ratios and any other relevant factors you deem necessary.
• Gross Income Multiplier
• Net Income Multiplier
• Operating Ratio
• Break Even
• Debt Coverage Ratio
• Overall Cap Rate
• Equity Dividend Rate
• Cash on Cash Return
• Present Value of Cash Flows
• Net Present Value
• Profitability Index
• Investment Value
• Internal Rate of Return
Which option would you select given the following factors:
Annual Growth Rate: 4%
Required Rate of Return: 8%
Tax Rate: 15%
Equity Available: $150,000
Loan Rate: 4%
Holding Period: 12 Years
Annual Price Appreciation: 3.5% per year
*For this example, we will not consider the vacancy rate for now.
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