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You are considering the purchase of a quadruplex apartment. Effective gross income (EGI) during the first year of operations is expected to be $33,600 ($700 per month per unit). First-year operating expenses are expected to be $13,440 (at 40 percent of EGI). Ignore capital expenditures. The purchase price of the quadruplex is $200,000. The acquisition will be financed with $60,000 in equity and a $140,000 standard fixed-rate mortgage. The interest rate on the debt financing is eight percent and the loan term is 30 years. Assume, for simplicity, that payments will be made annually and that there are no up-front financing costs.
a. What is the overall capitalization rate?
b. What is the effective gross income multiplier?
c. What is the equity dividend rate (the before-tax return on equity)?
d. What is the debt service coverage ratio?
e. Assume the lender requires a minimum debt coverage ratio of 1.2. What is the largest loan that you could obtain if you decide to borrow more than $140,000?
1. A company has a capital structure of 40% debt and 60% equity. The YTM on the company's bonds is 9%, and the company's effective tax rate is 40%. The CFO has estimated the company's WACC to be 9.96%. What is the company's cost of equity? Sho..
apply cash flow analysis and time value of money concepts and relationships. consider that you are nearing graduation
You hold the positions in the table below. What is the beta of your portfolio? If you expect the market to earn 12 percent and the risk-free rate is 3.5 percent, what is the required return of the portfolio? (LG3)
Jiminy's Cricket Farm issued a 30-year, 7.6 percent semiannual bond 5 years ago. The bond currently sells for 84.5 percent of its face value. The book value of this debt issue is $109 million.
Garner-Wagner is considering investing in a project that requires an investment of $3,000,000. The project will generate a cash inflow of 500,000 per year for the next 5 years. The cost of capital is 10%. What is the project's net present value?
Apple Company is one of the best-known global technology companies. Who are Apple's primary consumers? Current and potential competitors? Suppliers?
why does a rise in the level of interest rates adversely affect the market value of both assets and liabilities? a rise
The chief financial officer suggested that in the coming year all 120,000 sq yds should be devoted to Bermuda grass.
question 1. independent random samples taken on two university campuses revealed the following information concerning
these items are taken from the financial statements of tilley inc.prepaid insurance 1400equipment31000salaries and
The risk-free rate of return is 11 percent; the required rate of return on the market is 14%; and Schuler Company's stock has a beta coefficient of 1.5.
In March 2005, General Electric had a book value of equity of $113 billion, 10.6 billion shares outstanding, and a market price of $36 per share.
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