Question

An investment opportunity having a market price of $1,200,000 is available. Your expectation includes these: first-year...

An investment opportunity having a market price of $1,200,000 is available. Your expectation includes these: first-year gross potential income of $350,000; vacancy and collection losses equal to 20 percent of gross potential income; operating expenses equal to 40 percent of effective gross income; and capital expenditures equal to 10 percent of effective gross income. You could obtain a $850,000, 30-year mortgage loan requiring equal monthly payments with interest at 8.0 percent.

a.NOI

b.Effective Gross Multiplier

c.Monthly and annual payment  

d. Debt coverage ratio

e. Debt yield ratio

f. Overall capitalization rate

g.Equity dividend rate

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
Price $1,200,000.00
Gross potential Income $350,000.00
Vacancy loss $70,000.00 Equity
Effective gross income $280,000.00 $350,000.00
Oper Expenses $112,000.00
CapEx $28,000.00
NOI $140,000.00
Effective gross multiplier (Price/effective gross Income) 4.285714286
Monthly payment $6,237.00 Annual payment $74,843.99
Debt coverage (NOI/Annual payment) 1.870557763
Debt yield ratio (NOI/Loan amount) 16.47%
Capitalization rate (NOI/Price) 0.1166666667
Equity dividend rate (Equity/NOI) 2.5
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You have just completed the appraisal of an office building and have concluded that the market...
You have just completed the appraisal of an office building and have concluded that the market value of the property is $2,500,000. You expect potential gross income (PGI) in the first year of operations to be $450,000; vacancy and collection losses to be 12 percent of PGI; operating expenses to be 30 percent of effective gross income (EGI); and capital expenditures to be 4 percent of EGI. a. What is the EGI for the first year? b. What is the...
You have just completed the appraisal of an office building and have concluded that the market...
You have just completed the appraisal of an office building and have concluded that the market value of the property is $2,500,000. You expect potential gross income (PGI) in the first year of operations to be $450,000; vacancy and collection losses to be 11 percent of PGI; operating expenses to be 45 percent of effective gross income (EGI); and capital expenditures to be 5 percent of EGI. a. What is the EGI for the first year? b. Assume above-line treatment,...
You are considering purchasing an office building for $2,500,000. You expect the potential gross income (PGI)...
You are considering purchasing an office building for $2,500,000. You expect the potential gross income (PGI) in the first year to be $450,000; vacancy and collection losses to be 9 percent of PGI; and operating expenses and capital expenditures to be 42 percent of effective gross income (EGI). You will finance the acquisition with 25 percent equity and 75 percent debt. The annual interest rate on the debt financing will be 5.5 percent. Payment will be made monthly based on...
ONLY COMPLETE USING EXCEL SHOWING WORK - THANK YOU! You are considering the purchase of a...
ONLY COMPLETE USING EXCEL SHOWING WORK - THANK YOU! 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...
You are considering the purchase of an apartment complex. The following assumptions are made: The purchase...
You are considering the purchase of an apartment complex. The following assumptions are made: The purchase price is $1,000,000. Potential gross income (PGI) for the first year of operations is projected to be $171,000. PGI is expected to increase at 4 percent per year. No vacancies are expected. Operating expenses are estimated at 35 percent of effective gross income. Ignore capital expenditures. The market value of the investment is expected to increase 4 percent per year. Selling expenses will be...
An appraiser forecasts for the “Pawnee’s Dining Building” and provides the following forecasts: The building consists...
An appraiser forecasts for the “Pawnee’s Dining Building” and provides the following forecasts: The building consists of 2 floors with the following (6) properties: 1st floor – (3) fine dining restaurants: (1) - Charles Mulligan’s Steakhouse, renting for $3750/month (2) - Tom’s Bistro, each renting for $2000/month 2nd floor – (1) bar/lounge and (2) fast food joints (same company) (1) - Snakehole Lounge - renting for $3500/month (2) - Paunch Burgers (fast food), each renting for $1250/month Vacancy and Collection...
Income Concepts 1.    When Contract rent is established as equal to the market level, this is...
Income Concepts 1.    When Contract rent is established as equal to the market level, this is no Economic rent Excess or deficit rent Market value Reversionary benefit 2. A Property is leasing for $900 per month and the appraiser concludes the market rent is $800 per month. The result is a(n)                A) deficit of $100 to the lessee’s advantage.                B) deficit of $100 to the lessor’s advantage.                C) excess of $100 to the lessee’s advantage.                D)...
You are considering an investment into an income producing property (let’s call it Property A). The...
You are considering an investment into an income producing property (let’s call it Property A). The acquisition price is $227,500 and you can finance it with a 70% loan to value ratio mortgage with a 6% annual interest rate. This will be a fixed-rate mortgage with constant monthly The broker provides you with the following (incomplete) information about Property A. You determine that you will make this investment if it yields an after-tax internal rate of return on equity which...
You are considering the purchase of a small office building. The office building specializes in offering...
You are considering the purchase of a small office building. The office building specializes in offering facilities to small startup firms who are looking to avoid long-term commitments while their businesses are growing. Tenants sign one-year leases and may renew at market rates, if they so desire. The building is configured with 25 suites. Five (5) suites each have 4,000 useable square feet and ten (10) each have 2,500 usable square feet. The remaining ten (10) suites each have 1,000...
Please read the article and answear about questions. Determining the Value of the Business After you...
Please read the article and answear about questions. Determining the Value of the Business After you have completed a thorough and exacting investigation, you need to analyze all the infor- mation you have gathered. This is the time to consult with your business, financial, and legal advis- ers to arrive at an estimate of the value of the business. Outside advisers are impartial and are more likely to see the bad things about the business than are you. You should...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT