Alt Investments Question - Qbank investment, financing, property, mortgage, recent

noel

Consider a real estate investment that is 35% debt financed and 65% equity financed. The total mortgage cost for this property is 10% and the cost of equity financing is at a recent high of 13%. The capitalization rate for this investment as determined using the band-of-investments method is closest to:

A. 11.80%
B. 11.95%
C. 12.85%

cv4cfa

assuming 240 month mortgage

MiniMe7

I'm pretty sure Qbank is not correct in this case.

jacksparrow

I refuse to use QBank for L2....appears absolutely garbage.

ap0258

B) 11.95%

I don't think you need to calculate sinking fund factor because it gave you "total cost of mortgage". I beleive that includes the sinking fund factor. If they just gave you mortgage interest rate of 10%, then you would need to calculate sinking fund factor and more information would have been required.

firat

11.95% . Need length of mortgage for sinking fund factor

xilinx_altera

job71188 Wrote:
-------------------------------------------------------
> B) 11.95%
>
> I don't think you need to calculate sinking fund
> factor because it gave you "total cost of
> mortgage". I beleive that includes the sinking
> fund factor. If they just gave you mortgage
> interest rate of 10%, then you would need to
> calculate sinking fund factor and more information
> would have been required.


+1