Mid-Term Exam
6F:126
3/10/2008
Use the following information to answer questions 1-8.
Show all steps in your calculations and circle or box
your final answer.
Questions 1-8 are worth 5 points each, question 9 is worth 10 points, and the multiple choice
questions are worth 1 point each.
Price
$3,450,000
Interest Rate
5.6% the loan is interest only
Scheduled Income
$400,000
Loan Costs
1% of loan amount
Vacancy
3%
Depreciation Length
27.5 years
Expenses
$213,000
Land Value
$500,000
Loan to Value Ratio
80%
1.
How much cash will you need to enter into this investment?
3,450,000 – 0.8 x 3,450,000 + 0.01 x 0.8 x 3,450,000 =
3,450,000 – 2,760,000 + 27,600 =
717,600
2.
What will be your first year cash flow? (do not include the amount in question 1)
400000 x 0.97 – 213,000 – 0.056 x 0.8 x 3,450,000 =
388,000 – 213,000 – 154,000 =
20,440
3.
What is the cap rate?
400,000 x 0.97 – 213,000
388,000 – 213,000
175,000
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5.07%