You are considering the purchase of an industrial warehouse

Assignment Help Finance Basics

Reference no: EM13387715

You are considering the purchase of an industrial warehouse. The purchase price is $1 million. You expect to hold the property for five years. You have decided to finance the acquisition with the $700,000 loan, 10 percent interest rate, 30- year term, and annual interest-only payments. (That is, the annual payment will not include any amortization of principal.) There are no up-front financing costs. You estimate the following cash flows for the first year of operations:

$135,000 Effective gross income
27,000 Operating expenses

_________

$108,000 NOI

a.Calculate the overall rate of return (or “cap rate”).
b.Calculate the debt coverage ratio.
c. What is the largest loan that you can obtain (holding the other terms constant) if the lender requires a debt service coverage ratio of at least 1.2?

Reference no: EM13387715

Questions Cloud

Bankruptcy and reorganization please respond to the : bankruptcy and reorganization please respond to the followingexamine the typical first signs of a firmrsquos financial

Write a 800 -word paper describing at least three major : write a 800 -word paper describing at least three major financial institutions describe at least three major financial

Analyzes a legalethical issue or situation relating to a : prepare an 11- to 15-page paper excluding title page and reference page that analyzes a legalethical issue or situation

The first step in an external analysis is to determine the : the first step in an external analysis is to determine the industry to which your target business is classified.

You are considering the purchase of an industrial warehouse : you are considering the purchase of an industrial warehouse. the purchase price is 1 million. you expect to hold the

Make a chronological list of investments cash flows note : on january 2 20x1 bruce greene invested 10000 in the stock market and purchased 500 shares of heartland development

What average cycle time is needed for the assembly line to : the harvey motorcycle company produces three models the tiger a sure-footed dire bike the lx2000 a nimble cafeacute

Compute the present value of following cash flows rounding : calculate the present value of the following cash flows rounding to the nearest dollara. a single cash inflow of 12000

Why is culture change significant in long-term care choose : why is culture change important in long-term care? select one type of long-term care and present 3 barriers to

User Account

All Pages