Suppose that you are considering the purchase of an apartment building as a real estate investment....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Suppose that you are considering the purchase of an apartment building as a real estate investment. You believe that the purchase price of the property would be 4 million and that you would be able to finance the purchase with a 30-year loan for 85% of the purchase price with an annual interest rate of 5% with monthly payments and compounding. Use the information below to calculate the Year 1 equity dividend rate for this property. Year 1 Potential Gross Income: Year 1 Effective Gross Income: Year 1 Net Operating Income: Year 1 Before-Tax Cash Flow: a. 1.91% b. 7.49% C. 12.71% d. 13.55% e. 74.89% $550,000 $516,750 $299,553 $81,285 Suppose that you are considering the purchase of an apartment building as a real estate investment. You believe that the purchase price of the property would be 4 million and that you would be able to finance the purchase with a 30-year loan for 85% of the purchase price with an annual interest rate of 5% with monthly payments and compounding. Use the information below to calculate the Year 1 equity dividend rate for this property. Year 1 Potential Gross Income: Year 1 Effective Gross Income: Year 1 Net Operating Income: Year 1 Before-Tax Cash Flow: a. 1.91% b. 7.49% C. 12.71% d. 13.55% e. 74.89% $550,000 $516,750 $299,553 $81,285
Expert Answer:
Answer rating: 100% (QA)
The detailed answer for the above question is provided below Answer c 1271 To calculate the ... View the full answer
Related Book For
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
Posted Date:
Students also viewed these accounting questions
-
You are considering the purchase of an apartment complex. Purchase price: $775,000 BTCF: Year NOI 1 $103,085 2 $108,361 3 $113,875 4 $119,636 5 $125,651 Holding period is four years Cap rate is...
-
You are considering the purchase of an old fire station, which you plan to convert to an indoor playground. The fire station can be purchased for $200,000, and the playground will generate lifetime...
-
You are considering the purchase of an unusual corporate bond with a face value of $25,000, which matures in exactly six years. The cost of this bond is $16,000. Based on semiannual interest, what...
-
1. Our Play has (14.4/9.86) days of sales tied up in receivables, which is much (higher/lower) than the industry average. It takes Our Play (less/more) time to collect cash from its customers than it...
-
Why are monthly customer statement considered a control? Why is it important to separate the duties of responding to customer complaints from the accounts receivable and cash collection functions?
-
EBV is considering an investment in Softco, an early-stage software company. If Softco can execute on its business plan, then EBV estimates it would be five years until a successful exit, when Softco...
-
North Shore Architectural Stone, Inc., a company that installs limestone in residential and commercial buildings, agreed to supply and install limestone for a property owned by Joseph Vitacco. North...
-
N-Hexane is used to extract oil from soybeans. The solid residue from the extraction unit, which contains 0.78 kg liquid hexane/kg dry solids, is contacted in a dryer with nitrogen that enters at...
-
1. Tony stark is trying to talk pepper Potts into attending an event with him. Pepper does not want to attend because she feels that she and will be much older than most of the younger crowd...
-
What is meant by the term decision analysis?
-
Compute the annualized rate of return for a put option bought last year that is exercised at maturity, at a strike of $12, and which cost $3 to purchase knowing that the underlying stock is currently...
-
Desert Trading Company has issued $100 million worth of long-term bonds at a fixed rate of 7%. The firm then enters into an interest rate swap where it pays LIBOR and receives a fixed 6% on notional...
-
Suppose that the spot price of the euro is currently $1.10. The 1-year futures price is $1.15. Is the interest rate higher in the United States or the euro zone?
-
You manage a $23 million portfolio, currently all invested in equities, and believe that the market is on the verge of a big but short-lived downturn. You would move your portfolio temporarily into...
-
The aggregate supply curve takes on a different shape in the long run. a. Draw a long-run aggregate supply curve and label it LRAS 1 . b. What is the name for the level of output at which the...
-
Locate IRS Publication 15, Circular E, Employers Tax Guide at the IRS website (www.irs.gov), and review the table of contents on page 1 of the publication. Familiarize yourself with the items covered...
-
DEF sold stock by under pricing it by $2.00 from its current stock price. It also had a flotation cost of $1.00. It is expected to pay $1.50 as dividend next year with a dividend growth of 8%. Its...
-
Identify the source of funds within Micro Credit? How does this differ from traditional sources of financing? What internal and external governance mechanisms are in place in Micro Credit?
-
A two-year bond pays a coupon rate of 10 percent and a face value of $1,000. (In other words, the bond pays interest of $100 per year, and its principal of $1,000 is paid off in year 2.) If the bond...
-
Problem 11 contains details of a rights offering by Pandora Box. Suppose that the company had decided to issue new stock at $4. How many new shares would it have needed to sell to raise the same sum...
-
It has been suggested that one disadvantage of common stock financing is that share prices tend to decline in recessions, thereby increasing the cost of capital and deterring investment. Discuss this...
-
Figure18 . 25 shows the series of Walmart daily closing prices between February 2001 and February 2002 (thanks to Chris Albright for suggesting the use of these data, which are publicly available,...
-
Shipments of Household Appliances. The time plot in Figure 18 . 31 shows the series of quarterly shipments (in million dollars) of US household appliances between 1985 and 1989 (dataare available in...
-
Australian Wine Sales. Figure 18 .32 shows time plots of monthly sales of six types of Australian wines (red, rose, sweet white, dry white, sparkling, and fortified) for 19801994. [Data are available...
Study smarter with the SolutionInn App