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Assume that you are an investment analyst preparing an analysis of an investment opportunity for a client. Your client is considering the acquisition of an apartment complex from a developer at the point in time when the apartments are ready for first occupancy. Your have developed the following information. 1) Number of units = 36 2) First year market rent per unit = $450 per month 3) Rent is projected to increase by 8% each year 4) Annual vacancy rate = 3% of PGI 5) Annual collection loss = 2% of PGI 6) Annual operating expense = 35% of EGI 7) Miscellaneous yearly income (parking and washers/dryers) = $800 8) Monthly miscellaneous income is expected to remain constant 9) Purchase price = $2,000,000 10) Estimated value of land = $500,000 11) Anticipated mortgage terms: a) Loan to value ratio = .80 b) Interest rate = 6% c) Years to maturity = 25 d) Points charged = 3 e) Prepayment penalty = 2% of outstanding balance f) Level payment, fully amortized g) Fixed interest rate, annual payments 12) Anticipated holding period = 4 years 13) Proportion by which property is expected to appreciate during the holding period -- 5% a year 14) Estimated selling expenses as proportion of future sales price = 5% 15) Marginal income tax rate for the client = 28% 16) It is assumed that the property is put into service on January 1 st and sold on December 31st 17) Assume the client is "active" in the property management 18) It is assumed that the client has an adjusted gross income of $95,000 and has no other passive income not offset by other passive losses (for each year of the anticipated holding period) 19) Client's minimum required after tax rate of return on equity = 11% Given the information outlined, for the first year of operation calculate the: (1) Overall (cap) rate of return (2) Equity dividend rate (3) Gross income multiplier (4) Debt coverage ratio.
part-1q.1 critically evaluate the following statement most futures contracts do not end in the physical delivery of the
The Wiley Oakley Co. has just gone public. Under a firm commitment agreement, the company received $21.75 for each of the 6.66 million shares sold. The initial offering price was $23.60 per share, and the stock rose to $30.11 per share in the first f..
Calculate the value of the American call option. Write down the put-call parity relationship for this option.
Winslow, Inc. stock is currently selling for $40 a share. The stock has a dividend yield of 3.8 percent. How much dividend income will you receive per year if you purchase 500 shares of this stock?
Using only these three items, determine the net cash flow from operations, indirect method.
Executive salaries have been shown to be more closely correlated to the size of the firm than to its profitability. If a firm’s board of directors is controlled by management rather than outside directors, this might result in the firm’s retaining mo..
A loan is offered with monthly payments and a 8.75 percent APR. What’s the loan’s effective annual rate (EAR)? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
A taxable corporate issue yields 6.9 percent. For an investor in a 35 percent tax bracket, what is the equivalent aftertax yield?
What would happen to the value of the 10-year bond over time if the required rate of return remained at 13 percent, or if it remained at 7 percent? (Hint: with a financial calculator, enter PMT, I/YR, FV, and N, and then change (override) n to see wh..
Maxim Air Filters Inc. plans to borrow $267,000 for one year. What is the effective rate of interest?
uppose that a borrower is offered a choice between a fixed rate mortgage and a variable rate mortgage. If the borrower expects the inflation rate to increase, which of the rates would be more attractive to the borrower?
Lamar Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 30; and it currently pays after 5 days and takes discounts. Lamar plans to expand, which will require additional financing. Assume 365 days in year for your calculation..
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