The owner of an office building is interested in selling the building in order to raise capital for development of a large shopping mall. The building has a 30-year, 7% mortgage with 20 years of remaining payments; the original mortgage principal was $200 million. The building is fully occupied by tenants who have long-term leases of at least 20 years. The owner enjoys net income of S1 million per month after paying all operating expenses and the mortgage payment. The new owner would be able to take over the existing mortgage Question 5.a. (5 Points)What is the minimum offer that the owner would accept, assuming that the owner's discount rate is 20% (reflecting the owner's opportunities to pursue lucrative new developments) What is the maximum offer that a purchaser would make, assuming that the new purchaser a) plans to take over the existing mortgage and b) has a discount rate of 12% (reflecting potential purchasers who are interested in obtaining relatively safe long-term investments)? What is the maximum offer that a purchaser would make, assuming that the new purchaser a) is able to refinance the remaining amount on the mortgage as a 30-year, 7% loan and b) has a discount rate of 10% (reflecting the lower risks associated with securing the new financing) The owner expects that there could be potential purchasers such as those described in (b) and (c). What sale price would you recommend? Why might you recommend a sale price that is substantially higher than the minimum that the owner might accept? uestion 5.b. (5 Points Question 5.c. (5 Points) Question 5.d. (5 Points) The owner of an office building is interested in selling the building in order to raise capital for development of a large shopping mall. The building has a 30-year, 7% mortgage with 20 years of remaining payments; the original mortgage principal was $200 million. The building is fully occupied by tenants who have long-term leases of at least 20 years. The owner enjoys net income of S1 million per month after paying all operating expenses and the mortgage payment. The new owner would be able to take over the existing mortgage Question 5.a. (5 Points)What is the minimum offer that the owner would accept, assuming that the owner's discount rate is 20% (reflecting the owner's opportunities to pursue lucrative new developments) What is the maximum offer that a purchaser would make, assuming that the new purchaser a) plans to take over the existing mortgage and b) has a discount rate of 12% (reflecting potential purchasers who are interested in obtaining relatively safe long-term investments)? What is the maximum offer that a purchaser would make, assuming that the new purchaser a) is able to refinance the remaining amount on the mortgage as a 30-year, 7% loan and b) has a discount rate of 10% (reflecting the lower risks associated with securing the new financing) The owner expects that there could be potential purchasers such as those described in (b) and (c). What sale price would you recommend? Why might you recommend a sale price that is substantially higher than the minimum that the owner might accept? uestion 5.b. (5 Points Question 5.c. (5 Points) Question 5.d. (5 Points)
