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 bank is willing to allow the loan to negatively amortize. The loan will need to be paid off 3 years from today. To compensate for the riskiness of such a loan, the bank will allow a relatively low LTV ratio applied to the building purchase, 50%. The bank also requires that the first-year DCR is 1.30. The contract interest rate (a.k.a. the accrual rate) on the loan is 16%. Monthly loan payments are required.

a) First, the required monthly loan payment equals $ __________ Don't put the $ 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 the whole dollar.

	End of Year 1	End of Year 2	End of Year 3
Ending loan balance	$	$	$

two HINTS for you: If you're doing the math right, the interest payment in the 3rd year should equal $281,320. Also, notice that the "pay rate" is not given! Use the DCR info for whatever you'd be using a "pay rate" for!

(b) Now, assume that the building value does not change over the next several years. In this case, the loan-to-value ratio be at the end of the 3rd year equals _________ %. Don't put the % sign. Round to 2 decimal places. E.g., if you got 71.23%, type 71.23.

(c) If the loan-to-value ratio allowed by the bank at the time of sale in 3 years is below the actual loan-to-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 (c), lets say the bank wants to make sure that the loan-to-value ratio in 3 years does not exceed 55%. To make this happen, the investment 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 it if, say, there's high competition.) Don't put the $ sign. Round to whole dollar, and ROUND TO THE NEAREST 100,000. For example, if you got 1,234,567 then put 1,200,000; if you got 1,567,890 then put 1,600,000.

(PLEASE ANSWER IN EXCEL W/ FORMULAS) THANK YOU!