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A developer wants to finance a project costing $1.5 million with a 70 percent, 20-year loan at an interest rate of 4.5 percent. The projects
A developer wants to finance a project costing $1.5 million with a 70 percent, 20-year loan at an interest rate of 4.5 percent. The projects 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 1.20.
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.
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