A buyer is considering purchasing a 10-acre parcel in Peoria, Arizona for economic development. The parcel has a sales price of $720,000. The buyer agrees with the seller for purchasing the property with 15% down up front and pa
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A buyer is considering purchasing a 10-acre parcel in Peoria, Arizona for economic development. The parcel has a sales price of $720,000. The buyer agrees with the seller for purchasing the property with 15% down up front and paying off the balance in 12-months. If a bank is willing to provide 3% annual interest, compounded monthly, how much should the monthly deposit be into that account to pay off the desired balance to the seller?
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- Ace Development Company is trying to structure a loan with the First National Bank. Ace would like to purchase a property for $3.25 million. The property is projected to produce a first year NOI of $125,000. The lender will allow only up to an 80 percent loan on the property and requires a DCR in the first year of at least 1.25. All loan payments are to be made monthly but will increase by 3.5 percent at the beginning of each year for five years. The contract rate of interest on the loan is 5.5 percent. The lender is willing to allow the loan to negatively amortize; however, the loan will mature at the end of the five-year period. Required: a. What will the balloon payment be at the end of the fifth year? b. If the property value does not change, what will the loan-to-value ratio be at the end of the five-year period?You are considering purchasing a lot adjacentto your laundry business to provide adequate parking space for your customers. You need to borrow$75,000 to secure the lot. You have made a deal with alocal bank to pay the loan back over a five-year periodwith the following payment terms: 14%, 20%, 26%,32%, and 38% of the initial loan at the end of first,second, third, fourth, and fifth years, respectively.(a) What rate of interest is the bank earning fromthis loan?(b) What would be the total interest paid over thefive-year period?Assume that you are about to sell property (a vacant parcel of real estate) you own but otherwise have no use for. The net-of-sales-commission selling price for the property is $500,000. You are willing to finance this transaction over a 20-year period and have told the buyer that you expect a 12% pretax return on the transaction. The buyer has asked you for a payment schedule under several alternatives. Required: 1. What will be your periodic cash receipt, to earn a 12% return, if payments are received from the purchaser: NOTE: to answer the above questions, use the PMT function in Excel, as follows: PMT(rate,nper,pv,fv,type) where: rate is the interest rate for the loan, nper is the total number of payments, pv is the present value (i.e., the total amount that a series of future payments is worth now; also known as the principal), fv is the future value (or a cash balance you want to attain after the last payment is made; if fv is omitted, it is assumed to be 0 (zero)), and…
- Suppose a property you are seeking to purchase is valued at $200,000. You can take out a loan of 80 percent from the bank, which amortizes in 30 years. The current market interest rate is 7.35 percent. Suppose you can only afford a monthly payment of USD 900, but the seller is desperate to sell this property. The seller has already lowered the selling price to USD 180,000. What is the minimum amount of rebate that the seller should provide to you in order to make you purchase the property?You are thinking about buying a car, and a local bank is willing to lend you $20,000 to buy the car. Under the terms of the loan, it will be fully amortized over 5 years (60 months), and the nominal rate of interest will be 12 percent, with interest paid monthly. What would be the monthly payment on the loan? What would be the effective rate of interest on the loan?You are trying to evaluate the feasibility of purchasing a land. You plan to rent the plot of land to receive after-tax receipts of $2,500 per month. You are hoping to sell the land in the next ten years to receive after-tax proceeds of US$2.0 million to purchase a building containing at least four apartments. Assume the funds for purchasing the apartment will be drawn from your savings account which is currently earning 2% after taxes and that inflation rate is currently 5%. a) Identify the cash flows, their timing and the required rate of return applicable to calculating the maximum value you should pay for the land. b) Showing all calculations state if you should purchase the land for $1.6 million, justify your decision. What is the maximum price you should pay to acquire the single dwelling unit?