Please answer the following real estate questions There are

1296 ookmarks People Window Help xGreal estate havi XV Q real estate 2 Flashcards) Qu..x wu- Yahoo SecConneat t.htm Help Save & Exit Submit ork 2 -Chapters 5 to 8 6 MC Qu. 32 Based on the following information, determine... Based on the following Information, determine the location quotient for Music City and whether this city has a competitive advantage in the entertainment industry employment in entertainment in employment in Music City:656,785, employment in entertainment (nationally) 2.160,970; total employment (nationally):106,201,232 Music City: 3,020; total Multiple Choice 023,Yes. the chy has a competive advantage in this industry 4.43: Yes, the city has a competitsive adventage in this industry 4.43; No, the city does not have a competitive advantage in the industry 023, No, the city does not have a competitive advantage in this industry

Solution

MC Qu. 32

Answer:

Location Quotient =0.225977154.

No, the city does not have a competitive advantage in this industry.

Location Quotient (LQ) is a formula with the help of which economists can calculate whether enough workers are being employed in each sector in a region as put up against a national economy. The formula with the corresponding figures is as below:

LQi = (ei/e) / (Ei/E)

where,

LQi = Location Quotient for the Sector in the regional economy

ei = Employment in Sector i in the regional economy = 3020

e = Total employment in the local region = 656785

Ei = Employment in industry i in the national economy = 2,160,970

E = Total employment in the national economy = 106,201,232

So, LQ for Music city = (3020/656785) / (2160970/106201232)

= 0.00459815617 / 0.0203478807

= 0.225977154

Since the location quotient is 0.225977154 (i.e. 0.8 Or less) Music city does not have a competitive advantage in the entertainment industry.

MC Qu. 35

Answer : $1,449,635.50

We discount the annual cash flows from property using the opportunity cost for discounting purpose.

The formula for calculating the present value is as follows:

Present Value= Annual yield*PVIFA(r%,n)+Terminal Value*PVIF(r%,n)

where, r is the opportunity cost i.e. discounting rate = 8%

n is the number of times discounted i.e. 5 years.

So, Present value= 150000*PVIFA(8%,5)+1250000*PVIF(8%,5)

= 150000*3.99268+ 1250000*0.680583

= $ 598902.33+850728.75

= $ 1449631.08 = $1449635.50 (approx)

MC Qu. 36

Answer: $11,755,622

Net Operating Income at the end of the fifth year = $913058 (Given)

Expected growth rate for the property= 3%

We need to find out the projected sale price of the property at the end of the fifth year. So we go step wise:

Step 1: Expected Net operating income for the next year= $913058*1.03 = $940449.74

Step 2: Terminal Value of the property i.e. the projected sale price of the property at the end of fifth year is arrived at by discounting the expected net operating income by the capitalisation rate. In the given case, we assume that the net income is an annuity and so the value is calculated as follows:

Projected sale price = Expected Net operating income for the next year/Capitalisation rate

= $940449.74/0.08

= $11,755,622