A property is for sale with an asking price of $2.75 million. The property is assumed to increase in value by 3.5% per year and be sold at the end for that exact price. Year 1 gross rents are estimated to be $280,000 and to increase at 4% per year. Vacancies and collections are estimated at 8% of rents. Operating expenses are estimated to be 35% of Effective Gross Income (Gross rents less vacancies/collections). The purchase will be financed through a loan with a 75% LTV, a 30 year term and an interest rate of 5.25% - the loan will be interest only, no principal amortization. For depreciation purposes, 80% of the purchase price is attributable to the property structure with the balance attributed to land. year 5 gross Based upon your calculations, what is the Year 1 debt coverage ratio (DCR)?:" а. 1.12 b. 1.55 С. 0.65 d. 18.6

A property is for sale with an asking price of $2.75 million. The property is assumed to increase in value by 3.5% per year and be sold at the end for that exact price. Year 1 gross rents are estimated to be $280,000 and to increase at 4% per year. Vacancies and collections are estimated at 8% of rents. Operating expenses are estimated to be 35% of Effective Gross Income (Gross rents less vacancies/collections). The purchase will be financed through a loan with a 75% LTV, a 30 year term and an interest rate of 5.25% - the loan will be interest only, no principal amortization. For depreciation purposes, 80% of the purchase price is attributable to the property structure with the balance attributed to land. year 5 gross Based upon your calculations, what is the Year 1 debt coverage ratio (DCR)?:" а. 1.12 b. 1.55 С. 0.65 d. 18.6

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 21P

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