You are considering the purchase of an office building for $2,000,000. You anticipate $340,000 first-year...

60.1K

Verified Solution

Question

Finance

You are considering the purchase of an office building for $2,000,000. You anticipate $340,000 first-year gross potential income; vacancy and collection loss equal to 10% of gross potential income; miscellaneous income equal to 2% of PGI; operating expenses equal to 40% of effective gross income; and capital expenditures equal to 5% of EGI. You have arranged a mortgage loan of $1,500,000 with an annual interest rate of 6%. The loan will be amortized over 20 years with a monthly payment of $10,459.34. Total upfront financing costs (closing costs) will equal 2% of the loan amount. Fill out the cash-flow analysis below and answer/calculate questions 25 through 33. Item Amount Potential Gross Income (PGI): $. Less Vacancy and Collection Loss (VC): Add Miscellaneous Income: = Effective Gross Income (EGI): Less Operating Expenses (OE): Less Capital Expenditures (CAPX): = Net Operating Income (NOI): %3D Less Debt Service (DS): Before-Tax Cash Flow (BTCF): $. 25) What is the CAP Rate? 27 . What is the required equity investment? 28. Calculate the equity dividend rate 29.Calculate the net income multiplier 30. Calculate operating expenses ratio 31. Calculate debt coverage ratio 32. calculate the debt yield ratio 33. calculate the loan to value ratio

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students