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5 Jun 2019

Discuss the significance of property rights inccluding the significance of being able to exclude others from one's property. Include in this dicussion how property rights affect the poor especially in countries with extremely low per capita incomes

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Beverley Smith
Beverley SmithLv2
6 Jun 2019

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Hello,

If you could explain in detail how to solve the following problem so I may be able to solve similar problems in the future, that would be much appreciated. If it's possible to use a couple of equations without having to sum up equations in excel, that would be ideal.

Your uncle developed a new video game franchise and left the rights to you. Under current copyright law, your intellectual property is protected for 95 years. You expect that the profits from the franchise will be $1 million in its first year and that this amount will grow at a rate of 5% per year during the life of the copyright. Assume each year’s profits are received at the end of the period. Further assume that once the copyright expires, imitations and knockoffs will drive the profits from the intellectual property to zero. What is the present value of the video game franchise if the interest rate is 9% per year?

* Just need to answer Question F, Thanks

Central County includes five townships (Nixon, Reagan, Davis, Greasy Creek, Navaho) and one city (Booneville). It is served by two independent school districts: Seagram United (Davis and Greasy Creek Townships) and Yeltsin Consolidated Schools (Nixon, Reagan, and Navaho Townships). Each government in the county levies a property tax to finance its activities, although Booneville has also enacted a local earned income tax (it is expected to yield $750,000 in the next year). Property tax rates are applied to assessed value, defined to equal 50 percent fair cash value. Local unit tax rates fully overlap. The county assessor reports the following fair cash values for units within the county:

Nixon Township $69,535,000

Reagan Township $35,000,000

Davis Township $23,720,000

Greasy Creek Township $15,922,000

Navaho Township $27,291,000

Booneville (Davis Township) $88,450,000

Booneville (Greasy Creek Township) $75,392,000

The township value data are for the area outside of any city or town that resides in the township. Values within a city must be added to obtain the township total. Planned Expenditure by Taxing Units The following presents the amounts that each taxing unit has budgeted to spend in the next year:

Central County $3,428,000

Booneville City $4,539,000

Nixon Township $ 99,000

Reagan Township $ 150,000

Davis Township $ 250,000

Greasy Creek Township $ 175,000

Navaho Township $ 83,000

Seagram United Schools $6,350,000

Yeltsin Consolidated Schools $3,800,000

A. Set the property tax rate for each taxing unit. Report each rate in dollars per $100 of assessed value. 


B. The Knight family owns property with a fair cash value of $100,000 in the Davis portion of Booneville. Prepare an itemized tax bill for the Knights. 


C. Suppose the current market value of the Knights’ property is actually $225,000. What is their actual assessment ratio? What effective total property tax rate do they pay?

D. There are 1,800 students in Seagram United Schools and 600 students in Clinton Consolidated Schools. How many dollars per pupil would a tax rate of $1 per $100 of assessed value yield in each district? Explain the significance of this comparison. 


E. A factory with an estimated fair cash value of $15 million may be built in Navaho Township. If the factory has no impact on spending by any local government, i.e., levies do not change, and there are no other changes in the county assessed values, what total property tax bill would the factory face? 


F. Suppose that the county undergoes a general reassessment that doubles the assessed values of every taxing unit and that state law forbids any taxing unit from increasing its property tax levy by more than 3 percent. (The factory from part e, sadly enough, ends up in Mexico, so there is no impact from its value.) Assume that the property owned by the Knights (as above) doubles in assessed value and that the city, county, and school districts increase their levies by the maximum allowed, but that there is no increase in levies by any township. What is the Knights’ new property tax? 


* Just need to answer Question F, Thanks

James Scheidt is looking at a free-standing retail center thatis subject to a triple net lease to DrugSmart. The property’s leasepayment for the first three years is $250,000 per year. In lieu ofpercentage rent, the rent contractually increase 2% per yearstarting in year-four. James investment period is five years and heintends to sell the property at market rate pricing at the end ofyear-five. The market requires a real rate of return of 7% onsimilar real estate investments.

Question 1. Assuming that there is no vacancy orcredit risk associated with expected NOI stream, what is theterminal cap rate (associated with year 6 NOI) for the property? (2pts)

Question 2. How much should James be expected tosell the property at the end of year five? (2 pts)

At the end of year three, DrugSmart announced on its earningcall, that it has been struggling with increased drug prices andthat it would material affect its financial health going forward.It’s corporate bonds were immediately downgraded to BB and themarket risk premium increased by 300 bps from 7% to 10%.

Question 3. What effect, if any, does the increasedcredit risk have on the sale price of the property James wasexpecting and why? (2pts)

Question 4. How does this effect the terminate cap rate?Calculate the terminal cap rate. (2pts)

In an effort to keep DrugSmart from filing bankruptcy, landlordsincluding James Scheidt, agreed to lower the contractual rentincreases to 1%.

Question 5. Under this scenario, what is the expected salesprice of the property at the end of year five? (2 pts)

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