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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?
What is the WACC prior to the expansion? After the expansion? Why would leverage cause the increase in the cost of debt.
Create a brief scenario in which you highlight the value of break-even and profitability analysis for a health care organization.
Your uncle offers you a choice of $20,000 in fifty years or $45 today. If money is discounted at 13%, which offer should you choose? Explain with details and computations.
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Discuss and explain the instructor that discusses how your company (project company) is financed. Discuss the mix of debt and equity financing.
an auditor does not prepare financial statements but instead samples and investigates data to render a professional
The firm also has 2,500 bonds outstanding that are currently selling at par. Each bond has a $1,000 face value. What weight should be assigned to the preferred stock when computing this firm's WACC?
Assume that the yield on the bonds goes up by 1 percentage point and that the tax rate is now 39%.
Rainbow company has a debt-equity ratio of 1.25. Return on assets is 7.5%, and total equity is $625,000. What is the equity multiplier? Return on equity? Net income?
Which one of the following is an example of diversifiable risk? a. Income tax rates are revised by the federal government. b. The unemployment rate rises to 10.5 percent. c. The Fed lowers its discount rate. d. A CEO is fired for conduct unbecomin..
XYZ company has a balloon payment coming due from the recent acquisition. What TVM concept (s) is represented in the condition? What is the value of money represented by the situation?
Deposits of $8 are made in an account every 3rd year. If the rate of interest is 1% per year, calculate the Future Value of these deposits in the year 1001.
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