Debb Development has requested a construction loan for a new development project. The total project cost is $1,982,286. Debb wants to borrow $830,000 (plus accruing interest) from a commercial bank. The bank has examined Debbs project and is on board with the following construction loan: term of 12 months, 2% upfront origination fee (not financed, but paid in cash by Debb on day zero), 25% of the loan amount drawn evenly over first 4 months, 75% of the loan amount drawn evenly over remaining 8 months, 8% annual interest.

How much equity capital will Debb have in this deal when construction is finished and the construction loan is repaid?

A. $1,186,243

B. $3,065,691

C. $780,434

D. $858,247

E. none of the above

What is the yield to the construction lender in the previous question?

A. 15.35%

B. 12.86%

C. 17.01%

D. 11.43%

E. none of the above