You are considering the purchase of a quadruplex apartment building. Effective gross income during the first year of operations is expected to be $45,200. First-year operating expenses are expected to be $18,080 (at 40 percent of EGI). Ignore capital expenditures. The purchase price of the quadruplex is $200,000. The acquisition will be financed with $50,000 in equity and a $150,000 standard fixed-rate mortgage. The interest rate on the debt financing is 8 percent and the loan term is 30 years. Assume, for simplicity, that mortgage payments will be made annually and that there are no upfront financing costs.

a, What is the Net Operating Income (NOI) for the first year? Answer 1

b, What is the annual mortgage payment? Answer 2

c, What is the Before Tax Cash Flow (BTCF) for the first year? Answer 3

d, What is the overall capitalization rate? Answer 4

e, What is the effective gross income multiplier? Answer 5

f, What is the equity dividend rate (the before-tax return on equity)? Answer 6

g, What is the debt coverage ratio? Answer 7