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; Expected increase in value is 3.0% per year. Holding period is 15 years, and 5% selling expenses For simplicity, assuming that no capital improvement over the entire holding period 75% depreciable Investor’s tax rate is 28%, and capital gain tax rate is 15%. How much percentage of the IRR comes from cash flows from operations and how much from sale for each financing choice?

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; Expected increase in value is 3.0% per year. Holding period is 15 years, and 5% selling expenses For simplicity, assuming that no capital improvement over the entire holding period 75% depreciable Investor’s tax rate is 28%, and capital gain tax rate is 15%. How much percentage of the IRR comes from cash flows from operations and how much from sale for each financing choice?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 8P

See similar textbooks

Similar questions

You purchase a building that generates a stabilized NOI of $900,000 and has a capitalization rate of 8%. It has been financed with a mortgage loan of $6,750,000 with a 5-year term, a 25-year amortization and an interest rate of 6%. a) Calculate the Loan to Value (LTV) b) Calculate the Debt Service Coverage (DSCR). c) Calculate the loan balance at the end of one year. d) If you sell the building at the end of the year for $12,000,000 what is your Return on Equity (ROE)?
Yogesh
According to your interviews with hotel investors, equity yield rates are 14%. Year 6 NOI is expected to be 3% higher than year 5. Terminal capitalization rates are expected to be 13% at the time of the sale. Brokers charge 3% to the gross sales price to market the property you have also estimated the following NOI streams for the first five years of the property calculate the market value of the property using the income capitalization approach. Year 1 $875,000.00 Year 2 $901,000.00 Year 3 $928,000.00 Year 4 $956,000.00 Year 5 $985,000.00 **Using excel
Caddis Company acquired a building with a loan that requires payments of $19,000 every six months for 3 years. The annual interest rate on the loan is 8%. What is the present value of the building? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Multiple Choice O O O O $99,600 $114,000 $38,988 $65,402 $48,965
GBC Group is venturing into a commercial investment property, featuring a leasable building area of 100,000 square feet with an existing tenant paying a gross rent of $50 per square foot and estimated operating expenses at 50 % . The lender is proposing a permanent loan with a loan - to - value ratio of 70%, amortized over 15 years at a 5% interest rate (MPF = 0.007881). Considering a vacancy rate of 5% and a cap rate of 5%, what would be the indicated Breakeven Occupancy Ratio (BOR)? Question 10 options: 133 % 115 % 88% 106%
Casa Loma Group is making an investment in a commercial investment property, featuring a leasable building area of 100,000 square feet with an existing tenant paying a gross rent of $40 per square foot, and estimated operating expenses at 50%. The lender is offering a permanent loan with a loan-to-value ratio of 70%, amortized over 15 years at a 5% interest rate (MPF = 0.007881). Considering a vacancy rate of 10% and a cap rate of 10%, what would be the indicated Debt Coverage Ratio (DCR)? Question 2 options: 1.17 1.54 1.32 2.09
An investor is considering the acquisition of a "distressed property" which is on Northlake Bank's REO list. The property is available for $200,800 and the investor estimates that he can borrow $160,000 at 4.5 percent interest and that the property will require the following total expenditures during the next year: Inspection Title search Renovation Landscaping Loan interest Insurance Property taxes Selling expenses Required: a. The investor is wondering what such a property must sell for after one year in order to earn a 20 percent return (IRR) on equity. b. The lender is now concerned that if the property does not sell, investor may have to carry the property for one additional year. He believes that he could rent it (starting in year 2) and realize a net cash flow before debt service of $1,440 per month. However, he would have to make an additional $7,440 in interest payments on his loan during that time, and then sell. What would the price have to be at the end of year 2 in order…
You recently purchased an office building for $1,950,000 using the following loan terms: 70% LTV, 20-year amortization, 6.25% interest and monthly compounding. Assuming a net operating income of $150,000 in Year 1 and income taxes equal to $11,000, what is the expected ATCF from Operations in Year 1?
4
Kartman Corporation is evaluating four different real estate investments. Management plans to buy the properties today and sell them three years from today. The annual discount rate for these investments is 15%. The following table summarizes the initial cost and the sale price in three years for each property: Sale Price in Three Years Parkside Acres Cost Today $470,000 860,000 $930,000 Real Property Estates 1,420,000 Lost Lake Properties 680,000 1,080,000 Overlook 170,000 350.000 Kartman has a total capital budget of $860,000 to invest in properties. Which properties should it choose? The profitability index for Parkside Acres is (Round to two decimal places.)
14. You are an employee of a consultant company and have been given the following information to do an investment analysis of a new small income-producing property for sale to a potential investor. What is the before tax NPV using a 15% equity discount rate? (round your final answer to whole numbers) Asking Price Rent Year 1 Growth Rent Vacancy and Coll Loss Expenses LTV Loan Interest Loan Term Payments Per Year Property Appreciation Rate Holding Period Selling Costs Equity Discount Rate $2,000,000 $250,000 2.50% Equity Loan 10% 40% 70% 6% 30 12 3% 5 0% 15% of rents of EGI $600,000 $1,400,000 years The above information results in the following investment analysis. years of sale price
Please correct answer and don't use hand raiting