What would be the borrower before-tax yield on equity

Reference no: EM131948600

Question: A borrower wants to finance an apartment costing $2 million with 75% LTV, 20 year loan at the rate of 6%. The projects' NOI expected to be $150,000 during first year. Assuming that NOI and the building price will increase 5% each year. The lender will require an initial debt coverage ratio of at least 1.25. Assume that the selling cost is 5% of the property value. Show your cash flow for a 3-year period. What would be the borrower's before-tax yield on equity for the 3 year period? Would the lender be likely to take the loan to the borrower?

Reference no: EM131948600

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