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Unformatted text preview: What will be the propertys (annual) debt coverage ratio in the first year of operations? b) 1.19 7. Which of the following is not an operating expense associated with income producing (commercial) property? a) debt service 1 Chapter 18: Investment Decisions: Ratios Use the following information to answer questions 8 and 9 You are considering purchasing an office building for $2,500,000. You expect the Potential Gross Income (PGI) in the first year to be $450,000; Vacancy and Collection losses (VC) to be 9% of PGI; and Operating Expenses (OE) to be 42% of Effective Gross Income (EGI). 8. What is the implied first year overall capitalization rate? a) 9.5 percent 9. What is the effective gross income multiplier? b) 6.11 10. Given the following information, what is the required equity down payment? Acquisition price: $800,000 Loan-to-value ratio: 75% Up-front financing cost: 3% c) $218,000 2...
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- Spring '10