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1. Consider an 8.5% loan amortizing at a 25-year rate with monthly payments. What is the maximum amount that can be loaned on a property whose net operating income (NOI) is $500,000 per year, if the underwriting criteria specify a debt service coverage ratio (DSCR) no less than 125%?
2. Consider a building with a very long economic life. Assume at the end of year 6, NOI will be $80,000 and is expected to grow at a rate of 2 percent per year. Your company’s required rate of return is 12 percent. As part of your analysis, you must calculate the reversion value (REV) at the end of year 5. What is your estimate of the reversion value (rounded to the nearest $100)?
Verano Inc. has two business divisions a software product line and a waste water clean-up product line. The software business has a cost of equity capital of 10% and the waste water clean-up business has a cost of equity capital of 7%. Verano has 50%..
Using the P/E ratio approach to valuation, calculate the value of a share of stock under the following conditions: The investor's required rate of return is 13 percent. the expected level of earnings at the end of this year is $4. Now show that you g..
Shanken Corp. issued a bond with a maturity of 20 years and a semiannual coupon rate of 6 percent 2 years ago. The bond currently sells for 92 percent of its face value. The company’s tax rate is 35 percent. What is the pretax cost of debt? What is t..
You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.05 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio?
Evaluate the financial performance of a company of your choosing using the knowledge and technical skills that you have gained during the course so far. Provide a theoretical explanation of any ratio analysis. No need to recalculate ratios, often ..
Compare and contrast the two companies in terms of how well or how poorly they are performing in the areas of profit, debt, and asset turnover. Use appropriate ratios in your analysis. Indicate strategies for possible improvement in each area. the co..
An explanation on how risk plays a role within financial markets and how did Bernard Madoff change the way in which individuals viewed the stock market and their investing plans.
MM Theory on Capital Structure has three stages in its development which assumes 1) no taxes, 2) only corporate taxes are allowed, and 3) both personal and corporate taxes are allowed (Miller’s Model)? What implications to managers of each model with..
Construct a pro forma income statement for the first year and second year for the following assumptions: In year 2, Price per unit increases to $11.50, and unit of sales increases by 5%, all other assumptions remain the same.
How much interest will you pay in the 11th year of a $100,000, 7.5%, 25 year mortgage, assuming monthly compounding? (Hint: 121-input, you need to think about what should be entered for amort)
Explain why a firm needs to hedge if stockholders are holding a well-diversified portfolio of assets? What is the impact of hedging on a firm’s overall cost of capital? Will it affect both the cost of debt as the cost of equity? Explain.
Suppose that an investor with a two year investment horizon is considering purchasing a seven year 9% coupon bond selling at par. The investor expects that he can reinvest the coupon payments at an annual interest rate 10% and that at the end of the ..
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