What is the net operating income

Assignment Help Financial Management

Reference no: EM132064185

1. Dyrdek Enterprises has equity with a market value of $11.6 million and the market value of debt is $3.95 million. The company is evaluating a new project that has more risk than the firm. As a result, the company will apply a risk adjustment factor of 2.2 percent. The new project will cost $2.36 million today and provide annual cash flows of $616,000 for the next 6 years. The company's cost of equity is 11.39 percent and the pretax cost of debt is 4.96 percent. The tax rate is 39 percent. What is the project's NPV?

$175,739

$570,280

$211,451

2. Tom owns an office building with 12,000 square feet of office space. Annual rent is $50 per square foot. The building currently has 88% occupancy (ie 12% vacancy). If the operating expenses are 35% of Effective Gross Income, what is the Net Operating Income (NOI)?

(A) $46,800

(B) $184,800

(D) $528,000

3. Ann wants to buy a building. The annual NOI for the building will be $125,000. She wants to get a 20 year interest only fixed rate mortgage at an annual rate of 8.35% with annual compounding and annual payments to buy the building. The lender has a minimum Debt Service Coverage Ratio (DSCR) of 1.55.

What is the largest annual loan payment the lender will allow Ann to make based on the DSCR?

(A) $80,645.16

(B) $193,750.00

(D) $1,497,005.99

Reference no: EM132064185

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