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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%

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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: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%
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%
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