1. A property produces a 12% ATIRR on the total investment considering a tax rate of 25%. What is the maximum interest rate that could be paid on debt without causing the leverage to be negative? 

 A property is financed with a 75% loan at a 7% before-tax rate over 25 years. The property produces an ATIRR on total investment of 6% based on a tax rate of 25%. What is the ATIRR for the equity? 

 

1. An investment has the following characteristics: 

ATIRRP: After-tax IRR on total investment in the property: 7.5% BTIRRE: Before-tax IRR on equity invested: 12%
BTIRRP: Before-tax IRR on total investment in the property: 9.5% Marginal tax rate: 0.25 

What would be the break-even interest rate (BEIR), at which the use of leverage neither favorable nor unfavorable?

 

1. A lender requires a minimum 1.25 debt coverage ratio and will loan you money at 8%, annual payments for 10 years. If the annual net operating income on your property is $325,000, what is the maximum amount of money the lender will loan you and still satisfy the debt coverage ratio? Assume a normal amortizing loan.  

 

1. Suppose you have a real estate investment that your NOI for the current year is $400,000. Your lender requires a 25 percent participation in any NOI above $250,000. If your normal debt service (without the participation portion) is $125,000, what is your BTCF for the year? 

Answer rating: 100% (QA)

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