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30. Given the following property acquisition information, what is the required initial equity investment due at time zero (the date of acquisition)? • Asset Acquisition Price: $ 800,000. • Loan-to-Value (LTV) ratio: 0.75 (or 75%) • Financing fees and costs: 3% of Loan Amount A. $218,000. B. $200,000. C. $224,000. D. $182,000. E. $176,000. 31. A retail shopping center is purchased for CDN $2.1 million dollars. During the next four (4) years, the property appreciates at four (4%) percent per year. At the time of purchase, the property is financed at seventy-five (75%) percent loan-to-value (LTV) mortgage loan payable according to a thirty-(30)-year amortization schedule. The mortgage loan has an annualized contract interest rate of eight (8%) percent with monthly amortization and compounding. At the end of year four (EOY 4), the property is sold incurring eight (8%) percent selling expenses. What is the amount you calculate will be the Before-Tax Equity Reversion(BTER)?
COMM 307 SAMPLE FINAL EXAM QUESTIONS Page 17 of 18 _________________________________ Solution:Item Description Amount Loan Amount = 0.75 LTV x (CP of $2,100,000) $1,575,000 Monthly Mortgage Loan Payments 11,556.79 Remaining Mortgage Loan Balance 1,515,450 Gross Sale Price (GSP) [2,100,000 x (1.04)4] 2,456,703 Less: Selling Expenses (SE) (at 8% of SP) 196,536 Net Sale Proceeds (NSP) 2,260,167 Less: Remaining Mortgage Loan Balance 1,515,450 Before-Tax Equity Reversion (BTER) $ 744,717 ______________________________________ Scenario: 32. If the site you are acquiring in downtown Vancouver, is 1.40 acres in gross land area and the zoning ordinance restricts the maximum gross square footage you may develop on the site (without any zoning change or variance requests) to a Gross Building Area of 335,412 square feet, what is the Floor Space Ratio (“FSR”)? _________________________________ Solution:Gross Building Area (GBA) permissible / Gross Land Area comprising Site = FSR Thus, FSR = 335,412 SF / [1.40 acres X 43,560 SF per acre] = FSR FSR = 335,412 SF / 60,984 SF = FSR = 5.5______________________________________________________________________________
COMM 307 SAMPLE FINAL EXAM QUESTIONS Page 18 of 18 34. The term “residual land value” is best described by which of the following statements? A.The highest and best use valuation of a property less the appraised value of land when utilized fully to its highest and best use. B.The highest and best use valuation less the amount derived when discounting the long term value of a property’s income potential. C.The highest and best use valuation of a property less the land acquisition cost. D.The highest and best use valuation of property less the cost of all resources utilized to reach its highest and best use. 35. The Modified Internal Rate of Return (“MIRR”) approaches discounted cash flow analysis in much the same format as the IRR, but incorporates some additional rates to the treatment of all cash flows to derive its final result. The features of the MIRR that differentiate it from the IRR are _____________: END OF STUDY QUESTIONS – FINAL EXAM PREPARATION