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You are considering purchasing a small office building for $ 2 , 5 0 0 , 0 0 0 . You expect the potential gross
You are considering purchasing a small office building for $ You
expect the potential gross income in the first year to be $;
vacancy and collection losses to be percent of ; and operating
expenses and capital expenditures to be percent of effective gross
income EG You will finance the acquisition with percent equity and
percent debt. The annual interest rate on the debt financing will be
percent. Payment will be made monthly based on a year amortization
schedule.
Required:
a What is the implied first year overall capitalization rate?
b What is the expected debt coverage ratio in year of operations?
c If the lender requires the to be or greater, what is the
maximum loan amount the lender will provide?
d What is the debt yield ratio?
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If the lender requires the to be or greater, what is the maximum loan :
Note: Round your final answer to nearest whole dollar amount.
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