Current NOI $50,000 Financing is based on a 1.5 DCR applied to the first year NOI...

Transcribed Image Text:

Current NOI $50,000 Financing is based on a 1.5 DCR applied to the first year NOI Loan with an interest rate of 8.5% for 25 years can be obtained Assume the property will be sold in 10 years NOI expected to increase 3% for 4 years then 2% at a constant rate there after. Investors should earn a 9% return on an investment of this kind. What is the total present value of the property (mortgage and equity interests)? What is the present value of the debt in the property? What is the present value of the equity interest in the property? NOI DCR PMT $ 50,000.00 1.50 i N $ 33,333.33 $ 2,777.78 PMT 8.50% 25 2,778 PV ($344,968) Project NOI Year NOI PMT Cash flow to 1 50,000 33,333 16,667 3% 2 51,500 33,333 18,167 3% 3 53,045 33,333 19,712 3% 4 54,636 33,333 21,303 3% 5 56,275 33,333 22,942 2% 6 57,401 33,333 24,068 2% 7 58,549 33,333 25,216 2% 8 59,720 33,333 26,387 2% 9 60,914 33,333 27,581 2% 10 62,133 33,333 28,799 2% 63,375 Required Return 9% Growth Rate 3% 2 Current NOI $50,000 Financing is based on a 1.5 DCR applied to the first year NOI Loan with an interest rate of 8.5% for 25 years can be obtained Assume the property will be sold in 10 years NOI expected to increase 3% for 4 years then 2% at a constant rate there after. Investors should earn a 9% return on an investment of this kind. What is the total present value of the property (mortgage and equity interests)? What is the present value of the debt in the property? What is the present value of the equity interest in the property? NOI DCR PMT $ 50,000.00 1.50 i N $ 33,333.33 $ 2,777.78 PMT 8.50% 25 2,778 PV ($344,968) Project NOI Year NOI PMT Cash flow to 1 50,000 33,333 16,667 3% 2 51,500 33,333 18,167 3% 3 53,045 33,333 19,712 3% 4 54,636 33,333 21,303 3% 5 56,275 33,333 22,942 2% 6 57,401 33,333 24,068 2% 7 58,549 33,333 25,216 2% 8 59,720 33,333 26,387 2% 9 60,914 33,333 27,581 2% 10 62,133 33,333 28,799 2% 63,375 Required Return 9% Growth Rate 3% 2