Real Estate Appraisal II Examination questions for Second Semester 2018 / 2019 Session

Real Estate Appraisal II Examination questions for Second Semester 2018 / 2019 Session

  • Code:                    EST 425
  • Course:                Real Estate Appraisal II
  • Time Allowed:     2 ½ hrs
  • Instruction:          Answer question 1 and any other 4 of your choice

1.       An investors plans to buy a piece of development land for N1,400,000. A year following the purchase of the land, he plans to let out a portion of the land for two years to an industrial concern for the storage of its spare parts at N100,000 per annum. In the second year following the purchase of the land, he intends to develop an industrial building at a cost of N4,000,000. By the third year, he would install the equipment at an all inclusive cost of N1,800,000. An annex building would be added during the fifth year at a cost of N520,000. Beginning from the third year, the venture is expected to provide a net yearly revenue of N2,200,000 and by the sixth year, the revenue would increase to N2,450,000 per annum. This return is expected to continue for the following three years.

Market analysis indicates that similar investments in the neigbouhood have an average return of 15%.

Using  the external rate of return, advice the investor on the viability of the venture                                                                                 (6 marks)

b.       From the above information (1a), determine the internal rate of return given that the discounted rate are 15% and 24% respectively.             (16 marks)

2.       Define the term “Line of Balance”                                           (2 marks)

b.       Explain critically the purpose of the L.O.B method                         (2 marks)

c.       Stat 4 advantages of L.O.B                                                     (8 marks)

3.       A. project is having a cash outflows of N30,000 with annual cash inflows of N6,000. Calculate the discounted payback period, assume the company discounted rate is 15% and the life of the project is 10 years.         (6 marks)

b.       Year                               Annual Cash inflow

          1                                    80,000

          2                                    60,000

          3                                    60,000

          4.                                   20,000

With the above information, calculate cumulative cash inflows and indicate the payback period.                                                                                     ( 6 marks)

4a.     Write short note on profitability index                                    (4 marks)

b.       state four (4) advantages of payback and four disadvantages of pay back (8 marks)

5a.     Company C is planning to undertake a project requiring initial investment of N105 Million. The project is expected to generate N2.5 Million per year is net cash flows for 7 years.

   Calculate the payback period of the project using Even cash flow method   (4 marks)

b.       A project cost N2 million and yield profit of N30,000 after depreciation of 10% but before tax of 30%. Determine payback period if the project using straight line method  (8 marks)

6a.     Your company has N100 million available for investment in the following potential investment opportunities.

          Project                  NPV                     Initial Investment

          A                          15 Million            50 Million

          B                          10 Million            50 Million

          C                          10 Million            10 Million

          D                          20 Million            60 Million

          E                          12 Million            35 Million

Rank the project based on profitability index and identify the projects that should be accepted keeping in view the company’s capital budget constraints. (6marks)

b.       Statistical analysis can be broken down into various stages. Explain any three(3) stages of your choice.                                            (6 marks)

7.       Write briefly on the following

          i.        Statistical Analysis

          ii.       Beta distribution

          iii.      Work breakdown structure (WBS)

          iv.      Linear scheduling method

v.       Activity diagrams

          vi.      Critical path method (CPM)                                (12 marks)