Questions:

Answer the following questions with basic calculations/explanation

1. In what quarter is the loan fully amortized (assuming period end)?

15

3

14

7

1. What is the approximate margin (gross lot sales divided by equity profit)?

38%

8%

18%

28%

1. For only this question only, what lot minimum quarterly lot absorption pace is required to generate a leveraged IRR greater than your calculated WACC.

Be sure to reset you model the the default input assumptions after completing this question

insufficient information has been given

3 lots/qtr.

2 lots/qtr.

5 lots/qtr.

1 lot/qtr.

1. What is the approximate accelerated lot release rate?

\$76,500

\$51,000

\$110,400

\$92,000

1. Based on the discounted cash flow analysis, what is the approximate leveraged Internal Rate of Return (IRR)?

0% < IRR ≤ 11%

22%< IRR ≤29%

10% < IRR ≤ 22%

-10% < IRR ≤ -5%

1. What is the total dollar amount of the bank interest line item?

\$250,000

\$290,000

\$154,000

\$343,000

1. What is the total dollar amount of the contingency line item?

\$920,000

\$343,000

\$165,000

\$54,000

1. What is the approximate total of the initial uses of the capital stack?

\$12,000,000

\$4,000,000

\$5,600,000

\$1,000,000

1. For only this question only, assume the lot absorption pace is 5 lots/qrt.
Determine the ROC (return on cost) as calculated by total equity profit divided by total project costs. Be sure to reset you model the the default input assumptions after completing this question

20%

15%

25%

insufficient information has been given

17%

1. Assuming all other inputs remain as modeled, adjust the discount rate to 25%.Based on the resulting leveraged net present value, should the project be accepted?

Yes

No

1. In what quarter is the value of initial equity returned using the leveraged free cash flow (i.e., in what year is the cumulative leveraged free cash flow first positive)?

10

13

16

15

1. What is the approximate dollar amount of total equity required to fund the capital stack assuming leverage?

\$4,500,000

\$3,300,000

\$1,000,000

\$8,400,000

Sample Solution