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lord [1]
3 years ago
12

QUESTION 11 Given the following information, calculate the equity dividend rate for this investment: first-year NOI: $18,750; be

fore-tax cash flow: $11,440; acquisition price: $520,000; equity Investment: a) 20%. b) 3.6% c) 11.0% d) 2.2% e) 18.02%.
Business
1 answer:
Alja [10]3 years ago
4 0

Answer: D. 2.2%

Explanation: Equity Dividend Rate is calculated by dividing the Before Tax Cash Flow by the Acquisition price. If you need the answer in percentage form, you then multiply by 100.

Here, before-tax cash flow =  $11,440

Acquisition price = $520,000

So Equity Dividend Rate = \frac{11440}{520000} X 100

     Equity Dividend Rate = 2.2%

In this question, you do not need the Net Operating Income (NOI). You only need the NOI if the Before Tax Cash Flow is not given and the debt service payment is. If this is the case, you subtract the debt service payment from the NOI to get the Before Tax Cash Flow.

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