You want to purchase an office building in Brooklyn that is expected to generate $475554 net operating income (NOI) in the following year. You decide you want to take out a loan to finance the purchase of this property. It will be an IO loanat a rate of 6.82%, compounded annually, with annual payments. The lender will provide financing up to a minimum Debt Service Coverage Ratio (DSCR) of 1.2 based off the next year's NOI. What is the largest loan amount the lender willallow you to take based on the DSCR requirement? State your answer as a number rounded to the nearest cent (e.g. if you get $13.57654, write 13.58)

The interest and taxes are paid. First the interest is paid , then the taxex. Given NOI=475554,…

Answered: You want to purchase an office building…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 15P

See similar textbooks

Similar questions

Assume you are purchasing an income-producing property for $10,000,000. The estimated NOI in the next year is $600,000. A lender is willing to provide a mortgage with an annual interest rate of 4.0%. Payments will be made monthly based on a 30-year amortization schedule. The lender requires a minimum debt coverage ratio of 1.25. Based on this required minimum debt coverage ratio, what is the largest loan the lender is willing to make (rounded to the nearest dollar)? Assume the lender will not allow the loan to exceed 85% of the acquisition price under any circumstances. $8,500,000 O $8,478,000 O None of the selections is within a $2 of the correct answer O $8,378,450 O $13,964,083
Suppose you wish to purchase heavy equipment machinery and a commercial bank will lend you $65,000 for the transaction. The loan will be amortized over 5 years and the nominal interest rate will be 8% payable monthly. Calculate the monthly payment and the annual percentage rate (EAR) of the loan to be amortized.
Ace Development Company is trying to structure a loan with the First National Bank. Ace would like to purchase a property for $2.5 million. The property is projected to produce a first year NOI of $200,000. The lender will allow only up to an 80 percent loan on the property and requires a DCR in the first year of at least 1.25. All loan payments are to be made monthly, but will increase by 10% at the beginning of each year for five years. The contract rate of interest on the loan is 12%. The lender is willing to allow the loan to negatively amortize; however, the loan will mature at the end of the five-year period. What will the balloon payment be at the end of the fifth year (rounded to the nearest dollar)? Question 11 options:
Ace Development Company is trying to structure a loan with the First National Bank. Ace would like to purchase a property for $3.50 million. The property is projected to produce a first year NOI of $140,000. The lender will allow only up to an 80 percent loan on the property and requires a DCR in the first year of at least 1.25. All loan payments are to be made monthly but will increase by 3.5 percent at the beginning of each year for five years. The contract rate of interest on the loan is 5.5 percent. The lender is willing to allow the loan to negatively amortize; however, the loan will mature at the end of the five-year period. Required: a. What will the balloon payment be at the end of the fifth year? b. If the property value does not change, what will the loan-to-value ratio be at the end of the five-year period? Complete this question by entering your answers in the tabs below. Required A Required B What will the balloon payment be at the end of the fifth year? (Do not round…
Ace Development Company is trying to structure a loan with the First National Bank. Ace would like to purchase a property for $3.25 million. The property is projected to produce a first year NOI of $125,000. The lender will allow only up to an 80 percent loan on the property and requires a DCR in the first year of at least 1.25. All loan payments are to be made monthly but will increase by 3.5 percent at the beginning of each year for five years. The contract rate of interest on the loan is 5.5 percent. The lender is willing to allow the loan to negatively amortize; however, the loan will mature at the end of the five-year period. Excel calculation would be appreciated! a. What will the balloon payment be at the end of the fifth year? b. If the property value does not change, what will the loan-to-value ratio be at the end of the five-year period?
Ace Development Company is trying to structure a loan with the First National Bank. Ace would like to purchase a property for $3.25 million. The property is projected to produce a first year NOI of $125,000. The lender will allow only up to an 80 percent loan on the property and requires a DCR in the first year of at least 1.25. All loan payments are to be made monthly but will increase by 3.5 percent at the beginning of each year for five years. The contract rate of interest on the loan is 5.5 percent. The lender is willing to allow the loan to negatively amortize; however, the loan will mature at the end of the five-year period. Required: a. What will the balloon payment be at the end of the fifth year? b. If the property value does not change, what will the loan-to-value ratio be at the end of the five-year period?
You have just purchased a new warehouse. To finance the purchase, you have arranged for a 30-year mortgage loan for 80 percent of the $2,700,000 purchase price. The monthly payment on this loan will be $13,400. What is the APR on this loan? The EAR?
You have just purchased a new warehouse. To finance the purchase, you've arranged for a 30-year mortgage loan for 80 percent of the $2,200,000 purchase price. The monthly payment on this loan will be $12,000. a. What is the APR on this loan? Annual percentage rate b. What is the EAR? Effective annual rate
You are considering an option to purchase or rent a single residential property. You can rent it for $2,000 per month and the owner would be responsible for maintenance, property insurance, and property taxes. Alternatively, you can purchase this property for $200,000 and finance it with an 80 percent mortgage loan at 4 percent fixed-rate interest that will fully amortize over a 30-year period. The loan requires monthly payments. The loan can be prepaid at any time with no penalty. You have done research in the market area and found that (1) properties have historically appreciated at an annual rate of 2 percent per year, and rents on similar properties have also increased at 2 percent annually; (2) maintenance and insurance are currently $1,500.00 each per year and they have been increasing at a rate of 3 percent per year; (3) you are in a 24 percent marginal tax rate and plan to occupy the property as your principal residence for at least four years; (4) the capital gains exclusion…
You have just purchased a new warehouse. To finance the purchase, you’ve arranged for a 30-year mortgage loan for 80 percent of the $3,500,000 purchase price. The monthly payment on this loan will be $15,100. What is the APR on this loan? The EAR?
Ace Development Company is trying to structure a loan with the First National Bank. Ace would like to purchase a property for $2.5 million. The property is projected to produce a first year NOI of $200,000. The lender will allow only up to an 80 percent loan on the property and requires aDCR in the first year of at least 1.25. All loan payments are to be made monthly but will increase by 10 percent at the beginning of each year for five years. The contract rate of interest on the loan is 12 percent. The lender is willing to allow the loan to negatively amortize; however, the loan will mature at the end of the five-year period.a. What will the balloon payment be at the end of the fifth year?b. If the property value does not change, what will the loan-to-value ratio be at the end of the five-year period?
Tyrone Company wants to purchase a property that costs $150,000. The full amount needed to finance the purchase can be borrowed at 12% interest. The terms of the loan require equal end-of-year payments for the next 6 years. Determine the total annual loan payment.

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

SEE MORE TEXTBOOKS