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A developer wants to finance a project costing $1.5 million with a 70 percent, 25-year loan at an interest rate of 8 percent. The project's NOI is expected to be $120,000 during year 1 and the NOI, as well as its value, is expected to increase at an annual rate of 3 percent thereafter. The lender will require an initial debt coverage ratio of at least 1.20.
a. Would the lender be likely to make the loan to the developer? Support your answer with a cash flow statement for a five-year period. What would be the developer's before-tax yield on equity (BTIRR)?
b. Based on the projection in (a), what would be the maximum loan amount that the lender would make if the debt coverage ratio was 1.15 for year 1? What would be the loan-to-value ratio?
c. Assuming conditions in part (a), suppose that mortgage interest rates suddenly increase from 8 percent to 10 percent. NOI and value will now increase at a rate of 5 percent. If the desired DCR is 1.20, will the lender be as willing to make a conventional loan now? Support your answer with a cash flow statement.
After a 2-for-1 stock split, Strasburg Company paid a dividend of $1.75 per new share, which represents a 10% increase over last year's pre-split dividend. What was last year's dividend per share?
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On the same spreadsheet, compute the gross profit margin, operating income margin, and net profit margin for 2012, showing the numerator and denominator for all ratios.
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Cheeseburger and Taco Company purchases 18,669 boxes of cheese each year. It costs $15 to place and ship each order and $4.28 per year for each box held as inventory. The company is using Economic Order Quantity model in placing the orders. What is t..
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What is the approximate variance of returns for a security if the expected returns are -4.0%, 6.0%, and 15.0%, and the probabilities of occurring are 0.40, 0.30, and 0.30, respectively? A. 470 B. 63 C. 30 D. 961
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