The purchase price for an acquisition is $5,000,000. The buyer pays $15,000 for lender required reports and $10,000 to the title company for insurance and escrow. The seller provides a credit of $50,000 for property tax and $25,000 for repairs. The lender agrees to provide financing for 60% of the cost basis and will charge a 1% origination fee at closing on the loan amount. The MP will provide the balance of the equity and collect 1% of the cost basis at closing as an acquisition fee. What is the cost basis for this acquisition?
The purchase price for an acquisition is $5,000,000. The buyer pays $15,000 for lender required reports and $10,000 to the title company for insurance and escrow. The seller provides a credit of $50,000 for property tax and $25,000 for repairs. The lender agrees to provide financing for 60% of the cost basis and will charge a 1% origination fee at closing on the loan amount. The MP will provide the balance of the equity and collect 1% of the cost basis at closing as an acquisition fee. What is the cost basis for this acquisition?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The purchase price for an acquisition is $5,000,000. The buyer pays
$15,000 for lender required reports and $10,000 to the title company
for insurance and escrow. The seller provides a credit of $50,000 for
property tax and $25,000 for repairs. The lender agrees to provide
financing for 60% of the cost basis and will charge a 1% origination fee
at closing on the loan amount. The MP will provide the balance of the
equity and collect 1% of the cost basis at closing as an acquisition fee.
What is the cost basis for this acquisition?
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