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Question
Consider the table for an income property that is under evaluation for purchase with a $455,000 loan. What would be the equity dividend rate?
| Year 1 | Year 2 | Year 3 | ||||||||||||
| NOI | $ | 72,000 | $ | 74,880 | $ | 77,875 | ||||||||
| DS | 60,000 | 60,000 | 60,000 | |||||||||||
| Cash flow | $ | 12,000 | $ | 14,880 | $ | 17,875 | ||||||||
| Resale in year 3 | 900,000 | |||||||||||||
| Less mortgage balance | −435,000 | |||||||||||||
| Total cash flow | $ | 12,000 | $ | 14,880 | $ | 482,875 | ||||||||
| Present value of cash flow @ 15% | $ | 10,435 | $ | 11,251 | $ | 317,498 | ||||||||
A) 2.4 percent
B) 3.5 percent
C) $12,000
D) $317,498
Answer
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