Frank Evans purchased a 250,000 square foot office building in downtown St. Paul, Minnesota, on June 1, 2005. At the time of purchase, the building had a Net Operating Income of $2,500,000. Mr. Evans obtained a loan with a 7.92% loan constant with a 30-year amortization schedule at the closing of the property. The Annual Debt Service (ADS) for this loan is $1,871,100.00. The loan has a maturity date of May 31, 2015. The loan does not contain a prepayment penalty.

Answer the following questions based upon the information above. Show all work.

Mr. Evans wants to refinance the existing loan at the end of Year 4. He has been approached by the following three banks offering the following terms and conditions:

Bank A: They will refinance the balance of the existing loan at an interest rate of 7.0% interest based on a 25-year amortization schedule.

Bank B: They will finance up to the original loan amount at the time of purchase at an interest rate of 7.25% based on a 25-year amortization schedule.

Bank C: They will finance up to 80% of the original purchase price at 7.50% based on a 30-year amortization schedule.

Question 1. Assuming that the NOI has not changed over the years from the date of purchase, at the end of Year 5, Mr. Evans wants to maximize his cash flow. Which bank would he choose to refinance the loan with?