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What is the computed cap rate that will be used

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Reference no: EM133166273

Question - A developer has put together a business plan to construct a retail structure with the following Pro Forma information:

Adjusted Gross Income, Annual: $540,000

Estimated Expenses, Annual: $172,000

Planned Rate of Return: 13%

The developer is looking to obtain a long-term loan from a bank to cover the construction of the retail structure. After assessing the developer's credit worthiness, the bank assigns the developer an interest rate of 8.0%. The bank will limit the loan at a ratio 75%, Loan Value to Economic Value.

Required - Please build a spreadsheet (similar to the model on page 202) and answer the following questions:

What is the computed Cap Rate that will be used in computations of the Economic (Capitalization) Value?

What is the Economic (Capitalization) Value of the Project?

What is the maximum loan value the bank will be willing to lend based on all of these factors?

Reference no: EM133166273

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