00:02
We need to analyze the cash flow and answer the question.
00:06
So we'll calculate several financial metrics based on the provided information.
00:09
So let's start by calculating the key value.
00:12
So given data price purchase price of the office building is equal to dollar 40 lakh then first year gross potential income that is pgi is equal to seven lakh fifty thousand vacancy and collection loss vc is equal to 10 % of pgi miscellaneous income is equal to 2 % of pgi operating expense oe is equal to 40 % of effective gross income that is egi capital expenditure that is capx is equal to 5 % of egi mortgage loan amount is equal to dollar 28 lakh annual interest rate is equal to 6 % monthly mortgage payment that is ds dollar 20 ,000 60 a front financing cost that is closing cost is equal to 2 % of the loan amount.
02:02
So now we'll start with the calculation.
02:05
So first egi, so egi is equal to pgi subtracted from vc added to miscellaneous income.
02:16
So putting the value dollar seven lakh fifty thousand subtracted from 10 % multiplied by dollar 70 lakh fifty thousand added to 2 % dollar seven lakh fifty thousand, which is equal to dollar seven lakh fifty thousand subtracted from dollar 75 ,000 added to dollar 15 ,000 evaluating it we get dollar six lakh ninety thousand net operating income is equal to egi subtracted from oe subtracted from capx.
02:56
So putting the value dollar six lakh ninety thousand subtracted from 40 % dollar six lakh ninety thousand subtracted from 5 % multiplied by dollar six lakh ninety thousand, which is equal to dollar six lakh ninety thousand subtracted from dollar two lakh seventy six thousand subtracted from dollar 34 ,500 evaluating it we get dollar three lakh seventy nine thousand five hundred then number three before tax cash flow that is btcf is equal to noi subtracted from ds which is equal to dollar three lakh seventy nine thousand five hundred subtracted from dollar twenty thousand sixty evaluating it we get dollar three lakh fifty nine thousand four hundred forty.
03:54
Now the questions are what is the net operating income? so number one net operating income that is noi is dollar three lakh seventy nine thousand five hundred number two.
04:13
What is the cap rate? so the capitalization rate that is cap rate is typically calculated as noi divided by the property value assuming the property value is 40 lakh.
04:24
So cap rate is equal to noi divided by property value multiplied by hundred.
04:30
So dollar three lakh seventy nine thousand five hundred divided by dollar forty lakh multiplied by hundred which is equal to we get 9 .4875 % number three.
04:48
We need to calculate the effective gross income multiplier.
04:51
So egim is equal to property value divided by egi.
04:55
So dollar forty lakh divided by dollar six lakh ninety thousand the evaluating it we get approximately 5 .7971 number four.
05:14
What is the required equity investment? so the equity investment is the difference between the purchase price and the mortgage loan amount.
05:21
So equity investment is equal to purchase price subtracted from mortgage loan amount.
05:30
So dollar forty lakh subtracted from dollar twenty eight lakh evaluating it we get dollar twelve lakh number five.
05:46
We need to calculate the equity dividend rate.
05:48
So edr is equal to btcf divided by equity investment.
05:55
So dollar three lakh fifty nine thousand four hundred forty divided by dollar twelve lakh...