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Turkey Investments would like to buy a commercial building and is negotiating loan terms with a local bank. The building is for sale for $3 million. The estimated first-year NOI of the building is $200,000 Loan: The banks willing to allow the loan to negatively amortive. The loan will need to be paid off three years from today. To compensate for the riskiness of such loan, the bank will allow a relatively low LTV ratio applied to the building purchase, 50%. The bank also requires that the first year DCRS 1.30. The contract interest rate (aka the accrual rate on the loan is 16 percent. Monthly loan payments are required. (a) First, the required monthly loan payment equals s Don't put the S sign. Round to whole dollar. Then, build a loan amortization schedule for the next 3 years: Year 1 Year 2 and Year 3. No months, just years (like in class. Use your results to fill out the table below, Don't put the sign. Round to whole dollar. End of Year 1 End of Year 2 End of Year 3 Ending loan balance This kind turkey has a HINT for you. If you're doing the math right, the Interest payment in the Sell year shouht equat 5281,320. (b) Now, assume that the building value does not change over the next several years. The loan-to value ratio be at the end of the 3rd year equals decimal places. Es. if you got 71.23%, type 71.23 M. Don't put the sign. Round to 2 (c) If the fan-to-value ratio allowed by the bank at the time of sale in 3 years is below the actual tanto value ratio for the investment company, then the Investment company can afford to pay than the asking price. Type more or less (d) Continuing part (0) ter's say the bank wants to make sure that the loan to value ratio in 3 years does not exceed 55 percent. To make this happen the Westment company can negotiate the asking price and make the following counter-offer: assume that the offered price can be below the asking price, but it can also be above allsay, there's High competition) Don't put the slip Round to whole dollar, and to the nearest 100,000 Turkey Investments would like to buy a commercial building and is negotiating loan terms with a local bank. The building is for sale for $3 million. The estimated first-year NOI of the building is $200,000 Loan: The banks willing to allow the loan to negatively amortive. The loan will need to be paid off three years from today. To compensate for the riskiness of such loan, the bank will allow a relatively low LTV ratio applied to the building purchase, 50%. The bank also requires that the first year DCRS 1.30. The contract interest rate (aka the accrual rate on the loan is 16 percent. Monthly loan payments are required. (a) First, the required monthly loan payment equals s Don't put the S sign. Round to whole dollar. Then, build a loan amortization schedule for the next 3 years: Year 1 Year 2 and Year 3. No months, just years (like in class. Use your results to fill out the table below, Don't put the sign. Round to whole dollar. End of Year 1 End of Year 2 End of Year 3 Ending loan balance This kind turkey has a HINT for you. If you're doing the math right, the Interest payment in the Sell year shouht equat 5281,320. (b) Now, assume that the building value does not change over the next several years. The loan-to value ratio be at the end of the 3rd year equals decimal places. Es. if you got 71.23%, type 71.23 M. Don't put the sign. Round to 2 (c) If the fan-to-value ratio allowed by the bank at the time of sale in 3 years is below the actual tanto value ratio for the investment company, then the Investment company can afford to pay than the asking price. Type more or less (d) Continuing part (0) ter's say the bank wants to make sure that the loan to value ratio in 3 years does not exceed 55 percent. To make this happen the Westment company can negotiate the asking price and make the following counter-offer: assume that the offered price can be below the asking price, but it can also be above allsay, there's High competition) Don't put the slip Round to whole dollar, and to the nearest 100,000
