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Svetach [21]
3 years ago
12

Given the following information, calculate the debt coverage ratio for this investment. Potential gross income: $120,000, Vacanc

y rate: 9%, Net operating income: $57,900, Operating expenses: $51,300, Acquisition Price: $520,000, Debt service: $40,000.
Business
1 answer:
Kisachek [45]3 years ago
3 0

Answer:

the debt coverage ratio is 1.4475 times

Explanation:

The computation of the debt coverage ratio is shown below;

The Debt coverage ratio for investment is

= net operating income  ÷ Total debt

= $57,900 ÷ $40,000

= 1.4475 times

BY dividing the net operating income by the total debt we can get the debt coverage ratio

hence, the debt coverage ratio is 1.4475 times

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Use a T-account analysis to determine the amount of cash paid to suppliers of merchandise during the reporting period if cost of
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Answer:

The amount of cash paid to suppliers of merchandise during the reporting period is $31

Explanation:

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Account payables beginning balance is $14, ending balance is $16

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3 years ago
Suppose Simmons' common stock has a beta of 1.37, the risk-free rate is 3.4 percent, and the market risk premium is 8.2 percent.
rjkz [21]

Answer:

The WACC of the firm is 11.91%

Explanation:

The WACC or weighted average cost of capital is the rate of return that a business is expected to pay to all of its security holders- bonds, common stock, preferred stock- or is the cost of capital for the business.

To calculate the WACC, we use the following formula,

WACC = D/A * (1-tax rate) * rD  +  E/A * rE

Where,

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  • rD * (1-tax rate) is the after tax cost of debt
  • rE is the cost of equity or required rate of return on equity

We first need to calculate the required rate of return on equity (r). We will use the CAPM formula for r.

r = 0.034 + 1.37 * 0.082

r = 0.14634 or 14.634%

The total assets are equal to,

Assets = Debt + Equity

If for every $1 of equity, there is $0.45 of debt as given by debt-equity ratio.

Then,

Assets = 0.45 + 1    

Assets = $1.45

WACC = 0.45/1.45 * (1-0.23) * 0.076  +  1/1.45 * 0.14634

WACC = 0.11908 or 11.908% rounded off to 11.91%

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