Use the following facts about a 30-unit apartment investment to answer the next 7 questions:

Monthly rent per unit	$700
Operating expenses	$78,000
Vacancy rate	5%
Asking price	$1,690,000
Land value	$ 398,000
Overall capitalization rate	11%
Financing:	FRM 10%, 20 years; 1% Origination fee; 2 points

The lender is willing to finance up to 75% of the asking price. The investor, who manages the property, is in the 28% tax bracket.

1. What is the effective gross income?

a. $239,400

b. $245,700 c. $252,000 d. $256,560 e. None of the above

2. What is the net operating income?

a. $174,000

b. $167,700 c. $161,400 d. $150,000 e. None of the above

3. What is the before tax cash flow?

a. $14,620

b. $19,024 c. $27,220 d. $34,060 e. None of the above

4. What is the operating expense ratio?

a. 30.95%

b. 31.75% c. 32.58% d. 34.45% e. None of the above

5. What is the debt coverage ratio?

a. 1.10

b. 1.13 c. 1.19 d. 1.25 e. None of the above

6. What is the break-even ratio?

a. 0.87

b. 0.92 c. 0.94 d. 0.97 e. None of the above

7. A propertys net operating income is expected to be $32,000, which is expected to stay constant for the foreseeable future. Using a discount rate of 10%, estimate the propertys value. a. $320,000 b. $400,000

c. $266,700

d. $350,000

e. $320,000