Youre considering the purchase of the industrial warehouse

Reference no: EM13395698

You're considering the purchase of an industrial warehouse. The purchase price is $1 million. You expect to hold the property for five years. You've 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: EM13395698

Questions Cloud

Evaluation and analysis comprises problem solving and : the purpose of this assignment is to assist you in refining problem-solving capabilities that organizations already

What are the distinctive differences between a cash : conduct research that supports your answers to the following questionsbull address the followingo what are the

What have been the major marketing trends in the last : q 1. what have been the major marketing trends in the last decade? what new marketing trends do you anticipate in the

Three eye-ear-nose-and throat physicians decide to hire an : using the below assumptions prepare a three-level forecast and document your calculations.three eye-ear-nose-and throat

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

What type of entrepreneurial activity is hanrahan involving : the small three-story brick building was slowly being dwarfed by the new gleaming white brick-and-glass office and

What do you think are the most important : q1. what do you think are the most important characteristicsattributes of successful sales people? discuss btwsales is

Can persistent us deficits in current and payments accounts : can the united states continue to run current account deficits indefinitely? since in the long term the obvious answer

Acme medical supply company desires a target operating : acme medical supply company desires a target operating income amount of 100000 with assumptions inputs as

User Account

All Pages