Underlying Loan Owed to Lender by Powell

$18,803,840 current loan balance

8.5%, 30 years.

$1,861,012 annual payment.

24 years remaining.

Powell Portfolio wants to sell their 400 unit apartment complex for $20 million.

Mr. Trump offers to buy the property for $1 million down, the balance via installment loan - in other words, seller financing provided by Powell. Here are the particulars

Trump Proposal

$20 million price.

$1 million down.

Trump to pay Powell the balance of $19 million at 8.75%, 25 year amortization, 6 year balloon.

The annual payment will be $1,895,277.

At the End of Six Years

Trump pays Powell: $17,259,748

Powell pays the Lender with the underlying mortgage: $16,852,346

Question: (mutiple choice) At the termination of the deal, Powell will owe $16,852,346 on the underlying mortgage.

To determine the net horizon cash flow to Powell, first:

A. Find out the loan balance owed by Trump to Powell.

B. Multiply by 24 any remaining annual payments Trump owes Powell.

C. Subtract the balance due on the underlying mortgage from the original price paid by Trump.

D. Subtract $1 million from the original price paid by Trump.