For 2019, Bargain Basement Stores reported $11,500 of sales and $5,000 of operating costs (including depreciation). The company
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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 = 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.