Calculate leverage ratio for the investment

Assignment Help Financial Management
Reference no: EM131305008

Suppose that you intend to buy a house for $200,000. Calculate your leverage ratio for this investment in each of the following situations:

a. You pay the entire $200,000 price in cash.

b. You make a 20% down payment.

c. You make a 10% down payment.

d. You make a 5% down payment. Now assume that at the end of the year, the price of the house has risen to $220,000. Calculate the return on your investment for each of the situations listed above. In your calculations, ignore interest you pay on the mortgage loan and the value of any housing services you receive from owning your home.

Reference no: EM131305008

Questions Cloud

Advantages and disadvantages to investment banks : What are the advantages and disadvantages to investment banks and other firms of using an "up or out" employment policy? Are there advantages to employees?
How do publicly traded investment banks succeed in selling : If becoming a public corporation increases the risk in investment banking, how do publicly traded investment banks succeed in selling stock to investors?
Uses no current liabilities other than accounts payable : At year-end 2015, Wallace Landscaping’s total assets were $1.2 million and its accounts payable were $410,000. Sales, which in 2015 were $2.2 million, are expected to increase by 25% in 2016. Total assets and accounts payable are proportional to sale..
How might itsm impede a network design project : The "Networks Offer a Service" section mentioned ITSM and ITIL. Research these topics in more detail. What are ITSM and ITIL? How can a network design project benefit from the principles of ITSM? How might ITSM impede a network design project?
Calculate leverage ratio for the investment : Suppose that you intend to buy a house for $200,000. Calculate leverage ratio for this investment in each of the given situations:
What is the thevenin theorem or steps : What is the thevenin theorem or steps
How relate to specific challenges or supports for wellness : Discuss the similarities and differences between the philosophies of wellness.Discuss how they relate to the concept of wellness, how they relate to specific challenges or supports for wellness, and how learning about different philosophies may ha..
Discuss your thoughts on the given video : Discuss your thoughts on the video and how it supports this statement. Include a discussion of the terms "social change," "progressive organizing," and "community organizing".
Why is it an important network design goal : Discuss the term "scalability." What does it mean? Why is it an important network design goal? What are some challenges designers face when designing for scalability?

Reviews

Write a Review

Financial Management Questions & Answers

  Compute the price of a derivative whose payoff

The current spot price of a stock is $21, the expected rate of return of the stock is 11%, and the volatility is 12%. The risk-free rate is 5%. Compute the price of a derivative whose payoff in 5 months is ln(S5/12) + 32, where S5/12 is the stock pri..

  Expected return-what must the risk-free rate

A stock has an expected return of 12 percent, its beta is 1.70, and the expected return on the market is 9.4 percent. What must the risk-free rate be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places..

  How do the products offered to individuals by pension funds

How do the products offered to individuals by pension funds and LICOs differ from those of mutual funds? What is the outlook for each of these institutions as a growing share of the U.S. workforce approaches retirement?

  If the stable dollar assumption were dropped

Palomar Paper Products purchased land in 1996 for $15,000 cash. The company has held the land since that time. In 2014 Palomar purchased another tract of land for $15,000 cash. Explain how one could adjust the dollar amount reported in the land accou..

  Find the amount of the mortgage and find the down payment

Mary is purchasing a home for 294000$. She will finance her mortgage for 15 years with 4% interest. She is paying 20% down payment of the purchase price. Mary's annual taxes are 2564$ and her annual homeowner insurance is 1778$. Find the amount of th..

  What is the weighted-average cost of capital for firm

What is the weighted-average cost of capital for a firm with the following sources of funds and corresponding required rates of return: $5 million common stock at 16%, $500,000 preferred stock at 10%, and $3 million debt at 9%. All amounts are listed..

  What is the percentage of the founders family votes

Rust Pipe Co. was established in 1994. Four years later, the company went public. At that time, Robert Rust, the original owner, decided to establish two classes of stock. What is the percentage of the founder's family votes to Class B votes?

  How much money needs to be written off as bad debt

Zoom Café's policy is to write-off debts if the debts haven't been paid for more than 91 days. How much money needs to be written off as bad debt

  What are the required returns on each type of stock

RockTop Construction expects to pay a $1.10 dividend next year to its common stock holders. In each following year, common stock dividends will grow at 4%. RockTop pays its preferred shareholders a dividend of $2.25 every year. what are the required ..

  What is the RNOA

Before going into year-end closing a company has operating income of $40,000 with a marginal tax rate of 25%. Operating assets are $500,000 and operating liabilities are $200,000. What is the RNOA?

  Pros-cons of various sources of estimates of future earnings

Should a firm pay cash dividends in a year when it raises external common equity. Discuss the pros & cons of various sources of estimates of future earnings and dividend growth rates for a company.

  Accounting break-even level of units sold

Given the following facts about a project, determine both the accounting break-even level of units sold and the NPV break-even level of units sold.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd