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Marco's Development company wants to structure a loan for the purchase of property with 1st Bank. They would like to purchase a property for $2.5 million. The property is expected to produce first year NOI $200,000. NOI is projected to increase 3% per year.

The property is expected to be worth $3 million at the end of 5 years. The lender requires a DCR in the first year of at least 1.25x.

The contract rate of interest on the loan is 6% and will be amortized monthly over 25 years. The loan will mature in 5 years.

1. What are Marco's Development Co's BTCF's (Before-Tax Cash-Flows) from Operations & Sales (assume 5% sales costs) for a 5-year holding period?

2. How much would 1st Bank be willing to lend?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92815434

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