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.

A1)

A2)

A3)

B)

C1)

C2)

Would the lender be likely to make the loan to the developer? Support your answer with a cash flow statement for a five-year period. (Do not round intermediate calculations. Round "DCR" to 2 decimal places.) What would be the developer's before-tax yield on equity (BTIRR)? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) What would be the maximum loan amount that the lender would make if the debt coverage ratio was 1.20 for year 1 ? What would be the loan-to-value ratio? (Do not round intermediate calculations. Round "Loan-to-value ratio" to 2 decimal places.) Assuming conditions in part (a), suppose that mortgage interest rates suddenly increase from 4.5 percent to 6.5 percent. NOI and value will now increase at a rate of 5 percent. If the desired DCR is 1.20, will the lender be as willing to make a conventional loan now? Support your answer with a cash flow statement. (Do not round intermediate calculations. Round "DCR" to 2 decimal places.) \begin{tabular}{|l|c|c|c|c|c|} \hline & Year 1 & Year 2 & Year 3 & Year 4 & Year 5 \\ \hline NOI & & & & & \\ \hline Debt service & & & & & \\ \hline BTCF & & & & & \\ \hline DCR & & & & \\ \hline Cash flow from sale in year 5 & & & & \\ \hline Sales price & & & & \end{tabular} Would the lender be likely to make the loan to the developer? Support your answer with a cash flow statement for a five-year period. (Do not round intermediate calculations. Round "DCR" to 2 decimal places.) What would be the developer's before-tax yield on equity (BTIRR)? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) What would be the maximum loan amount that the lender would make if the debt coverage ratio was 1.20 for year 1 ? What would be the loan-to-value ratio? (Do not round intermediate calculations. Round "Loan-to-value ratio" to 2 decimal places.) Assuming conditions in part (a), suppose that mortgage interest rates suddenly increase from 4.5 percent to 6.5 percent. NOI and value will now increase at a rate of 5 percent. If the desired DCR is 1.20, will the lender be as willing to make a conventional loan now? Support your answer with a cash flow statement. (Do not round intermediate calculations. Round "DCR" to 2 decimal places.) \begin{tabular}{|l|c|c|c|c|c|} \hline & Year 1 & Year 2 & Year 3 & Year 4 & Year 5 \\ \hline NOI & & & & & \\ \hline Debt service & & & & & \\ \hline BTCF & & & & & \\ \hline DCR & & & & \\ \hline Cash flow from sale in year 5 & & & & \\ \hline Sales price & & & & \end{tabular}