A real estate investor has the following information on an office building: Purchase price is $1,250,000 with acquisition costs of $60,000 45,000 leasable square feet Initial rent of $10/sq. ft. per year and will increase 1.0 percent per year Vacancy rate of 8% of gross rent per year Operating expenses are 42% of effective gross income Three financing choices: All equity without any financing; Mortgage with 75% LTV ratio, 15 years, annual payments and 3.5% contract rate; Mortgage with 95% LTV ratio, 15 years, annual payments and 6.0% contract rate;

A real estate investor has the following information on an office building: Purchase price is $1,250,000 with acquisition costs of $60,000 45,000 leasable square feet Initial rent of $10/sq. ft. per year and will increase 1.0 percent per year Vacancy rate of 8% of gross rent per year Operating expenses are 42% of effective gross income Three financing choices: All equity without any financing; Mortgage with 75% LTV ratio, 15 years, annual payments and 3.5% contract rate; Mortgage with 95% LTV ratio, 15 years, annual payments and 6.0% contract rate;

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 19P

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