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What monthly payment must the hotel pay

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Assume that John is a business banker at Western Bank.  John has a client who runs a hotel in Canal Park. The hotel has five years remaining on its mortgage with the bank.  Monthly mortgage payments are equal to $45,000. The hotel because of all the storms and the prospect of a slowdown in the winter is having cash flow problems.  The hotel has proposed to John that for the next ten months that the hotel pay $0 and then for the remaining 50 months the hotel pay $56,000. Assume that Western Bank can earn 5.5% on its next best investment alternative.

  • Should John accept the offer?  Why or why not.
  • What monthly payment must the hotel pay for each of the remaining 50 months in order to make Western Bank indifferent between the initial mortgage payments and the restructured payments?  Show all your work

Reference no: EM132398354

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