Ask Question
BusinessBusiness
29 August, 16:28

A property is purchase for $15 million. Financing is obtained at a 75% loan-to-value ratio with total annual payments of $1,179,000. The property produces an NOI of $1,400,000. What is the equity dividend rate (ratio of first year cash flow to equity) ?

+4
Answers (1)
  1. 29 August, 17:56
    0
    5.89%

    Explanation:

    Income from a mortgaged property is divided into two section, first the loan payment and the second one is dividend for equity holder. These value are decided according to their ratio in the property value.

    In this question the value of $15 million is divided into equity portion and loan portion by 25% and 75% respectively.

    As per given data

    Total value of property = $15 million

    Value associated with Loan = $15 million x 75% = $11.25 million

    Value associated with Equity = $15 million x 25% = $3.75 million

    Net operating Income = $1,400,000

    Loan Payment = $1,179,000

    The residual value from income after loan payment is associated with the equity.

    Net Income = $1,400,000 - $1,179,000 = $221,000

    The net Income amount is associated with equity. So, we can calculate the equity dividend rate as follow

    Equity Dividend Rate = ($221,000 / $3,750,000) x 100 = 5.89%
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “A property is purchase for $15 million. Financing is obtained at a 75% loan-to-value ratio with total annual payments of $1,179,000. The ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers
You Might be Interested in
The part of the money supply produced by the private banking system is called by the government or central bank is called?
Answers (1)
Macroeconomics is concerned with the study of the nationwide market for specific goods like oranges.
Answers (1)
Selected information from Large Corporation's accounting records and financial statements for 2013 is as follows ($ in millions) : Cash paid to acquire a patent $48 Treasury stock purchased for cash 45 Proceeds from sale of land and buildings 75
Answers (1)
All of the following situations reflect a possible conflict of interest except: a. A CEO hires a relative for a company position although another candidate is more qualified. b. A CEO takes a cut in pay to decrease company overhead. c.
Answers (1)
When you want to start a business, what is the first step? Question 11 options: Figure out what you want to do. Get a loan. Seek counseling. Find out which business make the most money.
Answers (1)
New Questions in Business
ABC Services reported the following transactions for September, 2013. A) The owner opened the business with a capital contribution of $23,500 cash. It was credited to Capital. B) The business purchased office equipment for $11,500.
Answers (1)
You own a portfolio that is invested 20 percent in stock A, 30 percent in stock B, and the remainder in stock C. The expected returns on these stocks are 3.7 percent, 14.5 percent, and 18.2 percent, respectively.
Answers (1)
Maxwell acquires 100 percent of the outstanding voting shares of Daisy Company on January 1, 2018. To obtain these shares, Maxwell pays $200,000 cash and issues 6,000 shares of $5 par value common stock on this date.
Answers (1)
Market demand is found by: adding the individual quantities demanded at each price. adding the individual prices at each quantity demanded. multiplying the individual quantities demanded at each price.
Answers (1)
The December 31, 2018, balance sheet of Whelan, Inc., showed long-term debt of $1,450,000, $150,000 in the common stock account, and $2,750,000 in the additional paid-in surplus account.
Answers (1)
Home » Business » A property is purchase for $15 million. Financing is obtained at a 75% loan-to-value ratio with total annual payments of $1,179,000. The property produces an NOI of $1,400,000.
Sign Up Forgot Password?