Calculate the monthly loan payment for the loan balance

Assignment Help Finance Basics

Reference no: EM131959301

Question: A company is trying to structure a loan with the Bank of California. The company would like to purchase a property for $2.5 million. The property is projected to produce a first-year NOI of $200,000.

Loan: The lender will allow an 80 percent LTV loan on the property. It also requires a DCR in the first year of at 1.25. The contract (or the accrual) 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. All loan payments are to be made monthly, and every year will be 10 percent higher than in the previous year. (I.e., loan payments in months 13-24 are 10 percent higher than in months 1-12. Loan payments in months 25-36 are 10 percent higher than in months 13-24. And so on for five years.)

a. Calculate the loan balance be at the end of the fifth year. Show and explain all calculations.

b. Calculate what the monthly loan payment would instead need to be in order for the loan balance at the end of the first year to be equal to the loan balance at the beginning of the first year. Show a loan amortization table for this case, just for the first year: what would be the total loan payment? The principal payment? The interest payment?

c. If the property value does not change, what will the loan-to-value ratio be at the end of the five-year period? Calculate. Show and explain all calculations.

Reference no: EM131959301

Questions Cloud

What will the yearly after-tax depreciation benefit : Your company is thinking about a new project that will require $2.2 million of new equipment at the start of the project. The equipment will have a depreciable.

What amount must invest today if return is fifteen percent : What amount must you invest today if your return is 15% per year? What amount must you invest today if your return is 10% per year?

Determine the merger expense equals : The excess of the fair market value of the net identifiable assets of the Sutton Company over its net book value equals?

How will be your monthly payment during retirement : At retirement, you purchase an annuity with the money from your savings that will last for 14 years and earn a return of 5%.

Calculate the monthly loan payment for the loan balance : Calculate what the monthly loan payment would instead need to be in order for the loan balance at the end of the first year to be equal to the loan balance.

Trade balance and still have an appreciating currency : Under what conditions could a country have a sizable deficit in its trade balance and still have an appreciating currency?

How much money did the account have on january 1 : On January 1, 2012, $2, 300 was deposited into the account and the interest rate was lowered to 3.26% compounded monthly.

Determine the spending variances and the efficiency variance : Determine the spending variances (both variable and fixed), the efficiency variance, and the fixed overhead production volume variance.

Corporate or municipal bonds : What might determine whether an individual investor buys corporate or municipal bonds? Provide a numerical example.

User Account

All Pages