You are considering purchasing a small office building for $$2,500,000.$ You

expect the potential gross income $(PG)$ in the first year to be $$450,000$;

vacancy and collection losses to be $9$ percent of $PGl$; and operating

expenses and capital expenditures to be $42$ percent of effective gross

income $($EG$).$ You will finance the acquisition with $25$ percent equity and $75$

percent debt. The annual interest rate on the debt financing will be $5\mathrm{.}5$

percent. Payment will be made monthly based on a $25-$year amortization

schedule.

Required:

a$.$ What is the implied first year overall capitalization rate?

b$.$ What is the expected debt coverage ratio in year $1$ of operations?

c$.$ If the lender requires the $DCR$ to be $1\mathrm{.}25$ or greater, what is the

maximum loan amount the lender will provide?

d$.$ What is the debt yield ratio?

Complete this question by entering your answers in the tabs below.

Required $A$

If the lender requires the $DCR$ to be $1\mathrm{.}25$ or greater, what is the maximum loan :

Note: Round your final answer to nearest whole dollar amount.