An investor wants to finance the acquisition of $1.5 million building at the following terms:

a. Loan to Value (Cost): 70%

b. Term to maturity: 5 years

c. Term for amortization: 25 years

d. Annual interest rate: 8%

e. Required Debt Service Coverage Ratio (DSCR) to be maintained throughout loan term: 1.20

What are the monthly and annual loan payments?

The buildings NOI (Net Operating Income) is expected to be $120,00 during year 1, and NOI, as well as value, is expected to increase at an annual rate of 3% thereafter.

Would the lender be likely to make the loan to the investor? Support your answer with a cash flow statement for the five-year period.

Assume that the interest rate changes from 8% to 10%. Additionally, assume that NOI, as well as value, will now increase at a rate of 5% annually. If the required DSCR remains 1.20, will the lender be willing to make the loan now? Support your answer with a cash flow statement for the five-year period.