Case Problem
1) Based on net operating income projection for the first year, estimate the mortgage loan that will be available if the lender requires a debt coverage ratio of not less than 1.20. Anticipated loan terms are interested at 8.5 percent per annum, and level monthly payments to amortize the loan over 20 years. No discount points or loan origination fee is anticipated.
2) Round your mortgage loan estimate , to the nearest $100,000. Modify the St. George Apartments projection to derive a seven-year projection of before-tax cash flow, based on this loan.
3) Using the mortgage loan, develop a seven-year amortization schedule for the St. George Apartments. Include an anticipated remaining mortgage balance at the end of seven years.
4) Using the forecasted future market value develop (rounded to the nearest $100,000) estimate before-tax cash flow disposal, assuming the following:
a. The property is sold at the end of the seventh year (that is, before the first debt service payment falls due for the eighth year)
b. Transaction costs (brokerage, legal and accounting fees, and so forth) equal 8 percent of the selling price.
Attachment:- Case Assignment.rar