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PLEASE ADDRESS H-L. ALL COMPONENTS TIE IN TOGETHER. 6. You are considering the acquisition of a small office building. The purchase price is $775,000. Seventy-five
PLEASE ADDRESS H-L. ALL COMPONENTS TIE IN TOGETHER.
6. You are considering the acquisition of a small office building. The purchase price is $775,000. Seventy-five percent of the purchase price can be borrowed with a 30-year, 7.50% mortgage. Up- front financing costs will total 3.00% of the loan amount. The expected cash flows assuming a 5- year holding period are as follows: Year NOI 1 $48,492 2 $53,768 3 $59,282 4 $65,043 5 $71,058 e. Calculate the monthly mortgage payment. What is the annual debt service? f. Calculate the remaining principal balance at the end of year 4. g. Calculate the initial equity investment, assuming you're using debt financing. h. Calculate the before-tax levered cash flow. . Calculate the before-tax net proceeds in the year of sale. j. Calculate the levered NPV of this investment. Should you invest? k. Calculate the levered IRR of this investment. Should you invest? 1. Calculate, for the first year of operations, the: (1) Going-In Cap Rate (2) Equity Dividend Rate (3) Gross Income Multiplier (4) Debt Service Coverage Ratio
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