5. Calculate Loan to Value and Debt Service Coverage Use EXCEL to set up a discounted cash flow analysis Include calculation of Operating Income Include after Debt Service Cash Flow Total property acquisition price $4,224,000 Property consists of eight office suites, 3 on the first floor, 5 on the second floor Contract rents: 2 suites at $7,200 per month, 1 at $14,400 per month, and 5 at $6,240 per month. It is anticipated that rents will increase annually at the rate of 3% per year It is anticipated that vacancy and collection loss will be 10% per year Operating expenses are 40% of effective gross income Capital expenditures are 5% of effective gross income Anticipated holding period is 5 years Expected selling price is based on a cap rate of 8% It is anticipated that selling expenses will be 4% of the sales price The first mortgage is $3,168,000 The mortgage interest rate is 5% The loan term is 30 years Total upfront financing costs are 3%
5. Calculate Loan to Value and Debt Service Coverage Use EXCEL to set up a discounted cash flow analysis Include calculation of Operating Income Include after Debt Service Cash Flow Total property acquisition price $4,224,000 Property consists of eight office suites, 3 on the first floor, 5 on the second floor Contract rents: 2 suites at $7,200 per month, 1 at $14,400 per month, and 5 at $6,240 per month. It is anticipated that rents will increase annually at the rate of 3% per year It is anticipated that vacancy and collection loss will be 10% per year Operating expenses are 40% of effective gross income Capital expenditures are 5% of effective gross income Anticipated holding period is 5 years Expected selling price is based on a cap rate of 8% It is anticipated that selling expenses will be 4% of the sales price The first mortgage is $3,168,000 The mortgage interest rate is 5% The loan term is 30 years Total upfront financing costs are 3%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:5. Calculate Loan to Value and Debt Service Coverage
Use EXCEL to set up a discounted cash flow analysis
Include calculation of Operating Income
Include after Debt Service Cash Flow
Transcribed Image Text:Total property acquisition price $4,224,000
Property consists of eight office suites, 3 on the first floor, 5 on the second floor
Contract rents: 2 suites at $7,200 per month, 1 at $14,400 per month, and 5 at $6,240 per month.
It is anticipated that rents will increase annually at the rate of 3% per year
It is anticipated that vacancy and collection loss will be 10% per year
Operating expenses are 40% of effective gross income
Capital expenditures are 5% of effective gross income
Anticipated holding period is 5 years
Expected selling price is based on a cap rate of 8%
It is anticipated that selling expenses will be 4% of the sales price
The first mortgage is $3,168,000
The mortgage interest rate is 5%
The loan term is 30 years
Total upfront financing costs are 3%
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education