Ace Development Company is trying to structure a loan with the First National Bank. Ace would like to purchase a property for $3.50million. The property is projected to produce a first year NOI of $140,000. The lender will allow only up to an 80 percent loan on theproperty and requires a DCR in the first year of at least 1.25. All loan payments are to be made monthly but will increase by 3.5 percentat the beginning of each year for five years. The contract rate of interest on the loan is 5.5 percent. The lender is willing to allow theloan to negatively amortize; however, the loan will mature at the end of the five-year period.Required:a. What will the balloon payment be at the end of the fifth year?b. If the property value does not change, what will the loan-to-value ratio be at the end of the five-year period?Complete this question by entering your answers in the tabs below.Required A Required BWhat will the balloon payment be at the end of the fifth year? (Do not round intermediate calculations, Round your finalanswer to 2 decimal places. Enter your answer in dollars not in millions.)Balloon paymentRequired B >

ParticularsValueNOI in year 1140000.00DCR in first year1.25Monthly payment9333.33Value of…

Answered: Ace Development Company is trying to…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 24P

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Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of 50,000. First City has offered Hawley the alternatives listed here. Calculate the effective annual interest rate for each alternative. Which alternative has the lowest effective annual interest rate? a. A 12% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year b. A 9% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year c. An 8.75% annual rate on a discounted loan, with a 15% compensating balance d. Interest figured as 8% of the 50,000 amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the year
Ace Development Company is trying to structure a loan with the First National Bank. Ace would like to purchase a property for $3.25 million. The property is projected to produce a first year NOI of $125,000. The lender will allow only up to an 80 percent loan on the property and requires a DCR in the first year of at least 1.25. All loan payments are to be made monthly but will increase by 3.5 percent at the beginning of each year for five years. The contract rate of interest on the loan is 5.5 percent. The lender is willing to allow the loan to negatively amortize; however, the loan will mature at the end of the five-year period. Excel calculation would be appreciated! a. What will the balloon payment be at the end of the fifth year? b. If the property value does not change, what will the loan-to-value ratio be at the end of the five-year period?
Ace Development Company is trying to structure a loan with the First National Bank. Ace would like to purchase a property for $3.25 million. The property is projected to produce a first year NOI of $125,000. The lender will allow only up to an 80 percent loan on the property and requires a DCR in the first year of at least 1.25. All loan payments are to be made monthly but will increase by 3.5 percent at the beginning of each year for five years. The contract rate of interest on the loan is 5.5 percent. The lender is willing to allow the loan to negatively amortize; however, the loan will mature at the end of the five-year period. Required: a. What will the balloon payment be at the end of the fifth year? b. If the property value does not change, what will the loan-to-value ratio be at the end of the five-year period?
Ace Development Company is trying to structure a loan with the First National Bank. Ace would like to purchase a property for $2.5 million. The property is projected to produce a first year NOI of $200,000. The lender will allow only up to an 80 percent loan on the property and requires a DCR in the first year of at least 1.25. All loan payments are to be made monthly, but will increase by 10% at the beginning of each year for five years. The contract rate of interest on the loan is 12%. The lender is willing to allow the loan to negatively amortize; however, the loan will mature at the end of the five-year period. What will the balloon payment be at the end of the fifth year (rounded to the nearest dollar)? Question 11 options:
Ace Development Company is trying to structure a loan with the First National Bank. Ace would like to purchase a property for $2.5 million. The property is projected to produce a first year NOI of $200,000. The lender will allow only up to an 80 percent loan on the property and requires aDCR in the first year of at least 1.25. All loan payments are to be made monthly but will increase by 10 percent at the beginning of each year for five years. The contract rate of interest on the loan is 12 percent. The lender is willing to allow the loan to negatively amortize; however, the loan will mature at the end of the five-year period.a. What will the balloon payment be at the end of the fifth year?b. If the property value does not change, what will the loan-to-value ratio be at the end of the five-year period?
You want to purchase an office building in Brooklyn that is expected to generate $475554 net operating income (NOI) in the following year. You decide you want to take out a loan to finance the purchase of this property. It will be an IO loan at a rate of 6.82%, compounded annually, with annual payments. The lender will provide financing up to a minimum Debt Service Coverage Ratio (DSCR) of 1.2 based off the next year's NOI. What is the largest loan amount the lender will allow you to take based on the DSCR requirement? State your answer as a number rounded to the nearest cent (e.g. if you get $13.57654, write 13.58)
Starr Co, has been approved for a $ 100,000 loan commitment from its local bank. The bank has offered the following term =one year, up front fee =75 basis point, back end fee =25 basis points , and rate on the loan =8.00 percent. Starr expects to immediately take down $80,000 and no more during the year unless there is some unforeseen need. What is the total interest and fees Starr can expect to pay this loan commitment?
A buyer is considering purchasing a 10-acre parcel in Peoria, Arizona for economic development. The parcel has a sales price of $720,000. The buyer agrees with the seller for purchasing the property with 15% down up front and paying off the balance in 12-months. If a bank is willing to provide 3% annual interest, compounded monthly, how much should the monthly deposit be into that account to pay off the desired balance to the seller?
A manufacturer needs to borrow money to purchase a building. The purchase price of thebuilding is $1.5 million, and the company will put $300,000 in cash down at closing. If thecompany can borrow the difference from its bank at 4.85% for 20 years, what will the monthlyprincipal and interest payment of the loan be? Create an amortization schedule also.
Singapore Post has approached a bank to take out a mortgage loan purchase a new warehouse. The bank is willing to provide them with a 10-year loan of $400,000 at an interest rate of 12% per annum, compounding monthly. Singapore Post will be required to make monthly repayments on the loan. Calculate the monthly loan instalment that will be paid on the loan. Assume that Singapore Post instead negotiates to make annual repayments on the loan. What is the annual effective interest rate on the current loan terms? Singapore Airlines has 8% $100,000 debentures outstanding in the corporate bond market, with exactly 8 years left until maturity. The bonds pays coupon half yearly. Calculate the price of the corporate bond to yield an investor 6% per annum, compounding half yearly.
A property has a maturing loan and needs to be refinanced. It is appraised at $25 million based on a cap rate of 6%. Your lender has put two constraints on your next loan. It must have debt service coverage of 1.5x and LTV of 50%. Interest rates are 5% and the lender offers you a 10-year loan with a 20- year amortization schedule. Which constraint limits your loan? How much can you borrow?
A property Is expected to have NOI of $124,000 the first year. The NOI is expected to Increase by 5 percent per year thereafter. The appralsed value of the property Is currently $1.25 million and the lender is willing to make a $1,137,000 participation loan with a contract Interest rate of 5.5 percent. The loan will be amortized with monthly payments over a 20-year term. In addition to the regular mortgage payments, the lender wll recelve 50 percent of the NOI In excess of $124,000 each year until the loan is repald. The lender also will recelve 50 percent of any increase In the value of the property. The loan includes a substantial prepayment penalty for repayment before year 5, and the balance of the loan is due in year 10. (If the property has not been sold, the participation will be based on the appralsed value of the property.) Assume that the appralser would estimate the value in year 10 by dividing the NOI for year 11 by an 9 percent capitalization rate. Required: Calculate the…

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