Your employer, Kent, LLC$,$ is considering an investment in an office building that has the following cash flows: 

 

 Purchase in Year $0.....$ $ $-2,500,000$ 

 

 Year $1....180,000$ 

 

 Year $2.....276,000$ 

 

 Year $3....220,000$ 

 

 Year $4...239,000$ 

 

 Year $5...250,000,$ and a sale at  

 

 $$3,190,000$ takes place EOY $5$ 

 

 The company 's weighted average cost of capital that they use as their discount rate for such calculations is $10\%$ 

 

 Assume that the company bought the office building using $70\%$ mortgage debt at an interest rate of $4\mathrm{.}00\%$ over $240$ months. 

 

a. What would be the balance of the loan at the end of Year $5?$

b. What would be the total cash flows in Year $5,$ taking into consideration the cash flows, annual debt service, sale price and the balance on the loan at the EOY $5?$

 

 

 

 

Answer rating: 100% (QA)

Kent LLC Office Building Investment Analysis Loan Information Principal amount 2500000 Purchase price of the office building Mortgage interest rate 400 Loan term 240 months 20 years We need to solve t... View the full answer