What is the effective gross income multiplier

Assignment Help Financial Management

Reference no: EM132069705

You are considering the purchase of a quadruplex apartment building. Effective gross income 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 8 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 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 that you want to borrow more than $140,000?

Reference no: EM132069705

Questions Cloud

Futures contracts will bank need to cover overall exposure : Approximately how many futures contracts will the bank need to cover its overall exposure?

Discuss the impact of internal and external forces : Discuss the impact of both the identified internal and external forces on the organization's ability to develop a competitive strategy.

Assume that the roe and payout ratio stay constant : Assume that the ROE and payout ratio stay constant for the next four years.

How many pounds of raw materials should be purchased : Crespo Company has 160,000 pounds of raw materials on hand January 1st. How many pounds of raw materials should be purchased in January

What is the effective gross income multiplier : You are considering the purchase of a quadruplex apartment building. What is the overall capitalization rate? What is the effective gross income multiplier?

Final two tutorials of the session : Research Project (Group and Individual) Intent: 30% group presentation plus a 30% individual reportObjective(s):

What are the legal and ethical requirements for professional : What are the legal and ethical requirements for a professional to administer, interpret, and/or report the results of an MMPI-2-RF?

Analyze roles and responsibilities for compliance : Analyze Roles and Responsibilities for Compliance A. Examine the types of decisions financial managers make.

Components of samantha request : Read the hypothetical scenario. Answer each of the components of Samantha's request.

User Account

All Pages