Use the following information for Question 5 7.

1. You bought the building, located at Little Ferry, NJ for $50 Million, which was 6% Capitalization Rate (CAP). This building is occupied only by Wal-Mart.
2. You made 40% down and financed 60% of the purchase price at 5% APR, 5 year balloon with 25 year amortization schedule.
3. You have 25 year Absolute Triple Net lease with Wal-Mart. There is no annual escalation of the base rent.
4. The buildings $50 million value consists of $25 million land value and $25 million improvement.
5. In addition to $50 million purchase price, you had to pay 3% transaction (closing) costs (equivalently $1.5 million), which include the legal, financing, administrative, inspection, and all taxes.
6. Use 39 years for the annual depreciation.
7. Assume 30% tax rate.

Question 5:

Calculate the Net Operating Income (NOI) and the annual mortgage and interest payment.

Question 6:

What is the net cash flow for the first year? Note: Net Cash Flow is defined as NOI Annual Interest Payment Tax + Annual Depreciation.

Question 7:

What is the return on investment for the first year? Note: Return on investment is defined as the net cash flows divided by the total investment, not including the financing.

Question 8: Assume that a couple has a combined income of $355,000, moderate existing debt, property and school taxes of $18,000. Homeowners insurance is $3,300. Determine the size of the mortgage that this couple can qualify for. Please show all assumptions and the mortgage annuity solved by hand.