You are considering a hotel purchase. The current purchase price is $ 3,000,000. The bank is...

You are considering a hotel purchase. The current purchase price is $ 3,000,000. The bank is willing to finance 70% of the purchase price for 20 years in quarterly installments at 8% per annum mortgage nominal rate. What is the balloon payment you will have to pay, if you want to resell the hotel after 10 years? Consider a fully amortizing fixed rate mortgage.

a) $ 0

b) $ 1,445,395

c) $ 1,669,270

d) $ 1,981,333

Expert Solution

Hi,

This will solved in 2 steps. In first steps we will compute the payment of 20 year loan. In second step, we will compute the future value at the end of 10th year assuming loan is being repaid as per payment computed in step 1. Will this the answer is b) $1,445,395. Please refer to below snapshot:

jeff jeffy answered 11 months ago

You are the financial manager for a healthcare organization that is considering the purchase of a building costing $3,000,000.

You are the financial manager for a healthcare organization that is considering the purchase of a building costing $3,000,000. The resale value would be $4,000,000 in 5 years when the organization expects to move into a wing of a new hospital that is being built. You will consider the financial impact of several scenarios. The owners of the organization are concerned about the following: The business needs to decide whether the future value of the projected purchase outweighs the interest...

Suppose that you are considering the purchase of an apartment building for $2 million.A bank is...

Suppose that you are considering the purchase of an apartment building for $2 million.A bank is willing to loan you 85% of the purchase price with a 25 year loan with monthly payments and monthly compounding. If the bank charges you an annual interest rate of 10%. What will be your monthly payment for this loan. Show work a.10119 b.10373 c.13626 d. 14539 e.15444 Suppose that you are considering the purchase of a house for 300,000. A bank is willing...

You are considering the purchase of a distressed property. The price is $115,000, and you believe...

You are considering the purchase of a distressed property. The price is $115,000, and you believe that you can complete the required repairs and renovation and re-sell the property in twelve months. You can finance the purchase with a $97,750, 6.5% interest-only loan. The costs associated with acquiring the property include legal fees of $950, an inspection fee of $600, $5,500 to pay off an existing lien, and loan closing costs of $3,500. A thorough and careful assessment of the...

Simmons Company is considering the purchase price of a new floor machine. The purchase price of...

Simmons Company is considering the purchase price of a new floor machine. The purchase price of the equipment is $420,000 and it is expected to have a useful life of 7 years with no salvage value. The company uses straight line depreciation and pays income taxes at a rate of 25%. If the company requires that all new equipment investments pay for themselves within 3 years, how much annual cash operating savings must the floor machine generate, if it is...

You are considering the purchase of an apartment complex. Purchase price: $775,000 BTCF: Year NOI 1...

You are considering the purchase of an apartment complex. Purchase price: $775,000 BTCF: Year NOI 1 $103,085 2 $108,361 3 $113,875 4 $119,636 5 $125,651 Holding period is four years Cap rate is expected to be 7% in year 4 Selling expenses will be 5% of the sale price The 4-year Treasury bill rate is 3% and your risk premium for this project is 8% a) Calculate the NPV of this project assuming that you do not take any mortgages...

You are considering the purchase of a new home offered at a price of $225,000. Create...

You are considering the purchase of a new home offered at a price of $225,000. Create an amortization table in a new workbook that shows how much interest and principal you will pay each month for the duration of the loan. The following is a list of assumptions and requirements you need to consider for this assignment: You will be making a down payment of 20% on the home. The bank will offer you a loan at an annual interest...

You are considering the purchase of a new home offered at a price of $225,000. Create...

You are considering the purchase of a new home offered at a price of $225,000. Create an amortization table in a new workbook that shows how much interest and principal you will pay each month for the duration of the loan. The following is a list of assumptions and requirements you need to consider for this assignment: You will be making a down payment of 20% on the home (refer to Table 2.5 for loan and lease terms). The bank...

You would like to purchase a vacation home in 15 years. The current price of such...

You would like to purchase a vacation home in 15 years. The current price of such a home is $275,000 but the price of these types of homes is rising at a rate of 3% per year. How much would you have to invest in years 1 to 5, (the same amount in each year) in nominal terms to exactly pay for the vacation home if your investments earn 4% APR (compounded annually) in nominal terms?

First, BICA is considering the purchase of the Empty Arms hotel. Next year's NOI and cash...

First, BICA is considering the purchase of the Empty Arms hotel. Next year's NOI and cash flow is expected to be $2,000,000 and BIC's economic forecast of market supply and demand and vacancy levels indicated they will continue to be in balance. As a result NOI should increase by 1.5 percent each year based upon expected capital improvements, and BIC believes they should earn 9% total return on the investment. What is the estimated value of the property? What cap...

The current price of Gringotts Bank Corporation is $50. The price will increase by 40% or...

The current price of Gringotts Bank Corporation is $50. The price will increase by 40% or fall by 35% during each of the next two years. The company will pay a $9 dividend at the end of the first year if the stock price has risen, and will pay a $4 dividend if the price has fallen. It will not pay any dividends at the end of second year. The annualized, continuously compounded interest rate is 5%. What is the...

Question

You are considering a hotel purchase. The current purchase price is $ 3,000,000. The bank is...

Solutions

Expert Solution

Related Solutions

You are the financial manager for a healthcare organization that is considering the purchase of a building costing $3,000,000.

Suppose that you are considering the purchase of an apartment building for $2 million.A bank is...

You are considering the purchase of a distressed property. The price is $115,000, and you believe...

Simmons Company is considering the purchase price of a new floor machine. The purchase price of...

You are considering the purchase of an apartment complex. Purchase price: $775,000 BTCF: Year NOI 1...

You are considering the purchase of a new home offered at a price of $225,000. Create...

You are considering the purchase of a new home offered at a price of $225,000. Create...

You would like to purchase a vacation home in 15 years. The current price of such...

First, BICA is considering the purchase of the Empty Arms hotel. Next year's NOI and cash...

The current price of Gringotts Bank Corporation is $50. The price will increase by 40% or...