A developer wants to finance a project costing $$1\mathrm{.}5$ million with a $70$ percent, $20-$year loan at an interest rate of $4\mathrm{.}5$ percent. The project$$s NOI is expected to be $$100,000$ during year $1$ and the NOI, as well as its value, is expected to increase at an annual rate of $2$ percent thereafter. The lender will require an initial debt coverage ratio of at least $1\mathrm{.}20.$

Required:

a$-1.$ Would the lender be likely to make the loan to the developer?

a$-2.$ Support your answer with a cash flow statement for a five$-$year period.

a$-3.$ What would be the developer$$s before$-$tax yield on equity $($BTIRR$)?$

b$.$ What would be the maximum loan amount that the lender would make if the debt coverage ratio was $1\mathrm{.}20$ 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 $4\mathrm{.}5$ percent to $6\mathrm{.}5$ percent. NOI and value will now increase at a rate of $5$ percent.

c$-1.$ If the desired DCR is $1\mathrm{.}20,$ will the lender be as willing to make a conventional loan now?

c$-2.$ Support your answer with a cash flow statement. A developer wants to finance a project costing $$1\mathrm{.}5$ million with a $70$ percent, $20-$year loan at an interest rate of $4\mathrm{.}5$ percent. The

project's $NO$ is expected to be $$100,000$ during year $1$ and the NOI, as well as its value, is expected to increase at an annual rate of $2$

percent thereafter. The lender will require an initial debt coverage ratio of at least $1\mathrm{.}20.$

Required:

a$-1.$ Would the lender be likely to make the loan to the developer?

a$-2.$ Support your answer with a cash flow statement for a five$-$year period.

a$-3.$ What would be the developer's before$-$tax yield on equity $($BTIRR$)?$

b$.$ What would be the maximum loan amount that the lender would make if the debt coverage ratio was $1\mathrm{.}20$ 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 $4\mathrm{.}5$ percent to $6\mathrm{.}5$ percent. NOI and

value will now increase at a rate of $5$ percent.

c$-1.$ If the desired DCR is $1\mathrm{.}20,$ will the lender be as willing to make a conventional loan now?

c$-2.$ Support your answer with a cash flow statement.

Complete this question by entering your answers in the tabs below. TIUNIEIII IS

A developer wants to finance a project costing $$1\mathrm{.}5$ million with a $70$ percent, $20-$year loan at an interest rate of $4\mathrm{.}5$ percent. The

project's $N\frac{O}{?}$ is expected to be $$100,000$ during year $1$ and the NOI, as well as its value, is expected to increase an annual rate of $2$

percent thereafter. The lender will require an initial debt coverage ratio of at least $1\mathrm{.}20.$

Required:

a$-1.$ Would the lender be likely to make the loan to the developer?

a$-2.$ Support your answer with a cash flow statement for a five$-$year period.

a$-3.$ What would be the developer's before$-$tax yield on equity $($BTIRR$)?$

b$.$ What would be the maximum loan amount that the lender would make if the debt coverage ratio was $1\mathrm{.}20$ 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 $4\mathrm{.}5$ percent to $6\mathrm{.}5$ percent. NOI and

value will now increase at a rate of $5$ percent.

c$-1.$ If the desired DCR is $1\mathrm{.}20,$ will the lender be as willing to make a conventional loan now?

c$-2.$ Support your answer with a cash flow statement.

Complete this question by entering your answers in the tabs below. a$-2.$ Support your answer with a cash flow statement for a five$-$year period.

a$-3.$ What would be the developer's before$-$tax yield on equity $($BTIRR$)?$

b$.$ What would be the maximum loan amount that the lender would make if the debt coverage ratio was $1\mathrm{.}20$ 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 $4\mathrm{.}5$ percent to $6\mathrm{.}5$ percent. NOI and

value will now increase at a rate of $5$ percent.

c$-1.$ If the desired DCR is $1\mathrm{.}20,$ will the lender be as willing to make a conventional loan now?

c$-2.$ Support your answer with a cash flow statement.

Complete this question by entering your answers in the tabs below

Support your answer with a cash flow statement. $($Do not round intermediate calculations. Round $"$DCR$"$ to $2$ decimal places.$)$