The following data, objectives, and constraints have been provided with respect to a proposed venture: Cost (including
Question:
The following data, objectives, and constraints have been provided with respect to a proposed venture:
Cost (including transaction costs) $3,900,000
Net leaseable area (square feet) 29,500
Financing specifications:
a. Mortgage loan terms: 9 percent interest; 25 year monthly amortization schedule; renegotiable after 10 years
b. Minimum acceptable current yield on equity funds: 6 percent
Operating forecast for first year:
Market rent per square foot (based on analysis of comparable properties) $23.50
Vacancy rate (percent) 9
Operating expenses, per sq. ft. of leaseable area $9.50
If the minimum acceptable debt coverage ratio is 1.20 and the maximum loan-to-value ratio is 70 percent, what is the maximum total investment (combined equity funds) that will make the above proposal financially feasible?
Expert Answer:
Maximum Total Investment Total income cost of capital Cost of capital KeWe KdWd Cost of debt 9 A... View the full answer
