2) Assume that you were given an opportunity to purchase a real estate project using an...
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2) Assume that you were given an opportunity to purchase a real estate project using an equity participation loan. The NOI for each year of the holding period are shown below. NOI Additional information: 1) 3) 4) 5) 6) 7) a. b. Year 1 124,787 Year 2 132,225 Purchase price = $1,900,000 Estimated value of land = $500,000 Calculate: Anticipated mortgage terms: a) Loan to value ratio= .80 b) Interest rate = 5.25% c) Years to maturity = 25 d) Points charged = 3 Year 3 139,954 e) Prepayment penalty = 2% of outstanding balance f) Level payment, fully amortized g) Fixed interest rate, monthly payments Participation terms: a) Share of NOI = 15.5% over $130,000 b) Share of Appreciation = 18% Future sales price = $2,350,000 Year 4 148,468 Estimated selling expenses as proportion of future sales price = 5% Client's minimum required before-tax rate of return on equity = 12% The before-tax cash flows and the before-tax equity reversion (you do not need to calculate the after-tax cash flows or reversion). The before-tax net present value to the investor. 2) Assume that you were given an opportunity to purchase a real estate project using an equity participation loan. The NOI for each year of the holding period are shown below. NOI Additional information: 1) 3) 4) 5) 6) 7) a. b. Year 1 124,787 Year 2 132,225 Purchase price = $1,900,000 Estimated value of land = $500,000 Calculate: Anticipated mortgage terms: a) Loan to value ratio= .80 b) Interest rate = 5.25% c) Years to maturity = 25 d) Points charged = 3 Year 3 139,954 e) Prepayment penalty = 2% of outstanding balance f) Level payment, fully amortized g) Fixed interest rate, monthly payments Participation terms: a) Share of NOI = 15.5% over $130,000 b) Share of Appreciation = 18% Future sales price = $2,350,000 Year 4 148,468 Estimated selling expenses as proportion of future sales price = 5% Client's minimum required before-tax rate of return on equity = 12% The before-tax cash flows and the before-tax equity reversion (you do not need to calculate the after-tax cash flows or reversion). The before-tax net present value to the investor.
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To calculate the beforetax cash flows and the beforetax equity reversion we need to analyze the income and expenses associated with the real estate project Given information Purchase price 1900000 Val... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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