Ann Ahlysis found a co-op apartment that costs $800,000 to buy.She will make a $100,000...

Ann Ahlysis found a co-op apartment that costs $800,000 to buy. She will make a $100,000 down payment and will get a mortgage for $700,000. It will be a fully amortizing 30-year fixed rate mortgage at 3.63% with monthly payments.

(A) What is the Loan to Value (LTV) ratio of the loan?

(B) What will Ann’s monthly mortgage payment be?

(C) What is the total sum of all cash flows that Ann will pay the bank over the entire life of the loan, assuming she never prepays?

(D) Assuming Ann sells her co-op at the end of year 10, what will her mortgage loan balance be at time of sale?

(E) If the value of Ann’s co-op grows 4.5% per year (compounded annually) what will Ann’s home value be in 10 years? Remember, the cost was $800,000 when she purchased it.

Solutions

Expert Solution

(A) What is the Loan to Value (LTV) ratio of the loan?

Loan to value ratio = mortgage amount / House cost = 700000 / 800000 = 0.875

(B) What will Ann’s monthly mortgage payment be? $3194.33

(C) What is the total sum of all cash flows that Ann will pay the bank over the entire life of the loan, assuming she never prepays?

Total sum of all cash flows = Monthly payment * total # of months = $3194.33 * 360 = $1149958.58

(D) Assuming Ann sells her co-op at the end of year 10, what will her mortgage loan balance be at time of sale?

Mortgage Balance after 10 years = $544492.19

(E) If the value of Ann’s co-op grows 4.5% per year (compounded annually) what will Ann’s home value be in 10 years? Remember, the cost was $800,000 when she purchased it.

Value of House = Current cost * (1 + Growth rate)^Years

Value of House = 800000 * (1 + 4.50%)^10

Value of House = 800000 * 1.553

Value of House after 10 years = $1242375.54

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Moe's building costs $800,000 and it is expected to make $150,000 per year for the next...

Moe's building costs $800,000 and it is expected to make $150,000 per year for the next 6 years. Given a required rate of return of 12% and maximum required payback period of 4 years, calculate the Payback Period and Discounted Payback Period for this big project and explain whether or not the big project should be accepted under each of those two methods.

Bale Co. incurred $100,000 of acquisition costs related to the purchase of the net assets of...

Bale Co. incurred $100,000 of acquisition costs related to the purchase of the net assets of Dixon Co. the $100,000 should be Allocated on a pro rate basis to the nonmonetary assets acquired. Capitalized as part of goodwill and tested annually for impairment. Capitalized as another asset and amortized over 5 years. Expensed as incurred in the current period.

Tank Co. is evaluating a project that costs $100,000 and has a 5-year life. Assume that...

Tank Co. is evaluating a project that costs $100,000 and has a 5-year life. Assume that depreciation is prime-cost to zero salvage value over the 5-years, and the equipment can be sold for $6,000 at the end of year 5. The average discount rate for such a project is 10 per cent on such projects. The individual tax rate is 15 per cent and the corporate tax rate is 30 per cent. It is projected that they will sell 12000...

Ann wants to buy a building. The annual NOI will be $100,000 She wants a 30...

Ann wants to buy a building. The annual NOI will be $100,000 She wants a 30 year fully amortizing fixed rate mortgage at an annual rate of 5% with compounding monthly payments. The lender has a minimum DSCR of 1.2. If Ann gets a 50% LTV loan for $500,000 what is her DCSR?

CLAD Corp Inc. reported the following: Sales $15,000 Op Costs (including depreciation) $6,000 Op Income (EBIT)...

CLAD Corp Inc. reported the following: Sales $15,000 Op Costs (including depreciation) $6,000 Op Income (EBIT) $9,000 WACC 10.00% Tax Rate 40% Investor-supplied capital $20,000 What is the Economic Value Added (EVA)?

Recall a time in a co-op placement, a summer job, an internship, a student club, a...

Recall a time in a co-op placement, a summer job, an internship, a student club, a student team project, etc. when your values conflicted with what you were expected to do in a particular, nontrivial decision, and you spoke up and acted to resolve the conflict. Consider the following and write down your thoughts: What did you do, and what was the impact? What motivated you to speak up and act? Identify the values that conflicted with what you were...

A food co-op sells a homogenous good called groceries, denoted g. The co-ops cost function is...

A food co-op sells a homogenous good called groceries, denoted g. The co-ops cost function is described by: C(g) = F +cg; where F denotes fixed cost and c is the constant per unit variable cost. At a meeting of the co- op board, a young economist proposes the following marketing strategy: Set a fixed membership fee M and a price per unit of groceries pM that members pay. In addition, set a price per unit of groceries pN higher...

Write a Matlab Code for the following: A co-op is paid a $15.00 hourly wage up...

Write a Matlab Code for the following: A co-op is paid a $15.00 hourly wage up to 20 hours per week. In addition, any hours over 20, the co-op collects an overtime wage that is 1.5 times greater, and any hours over 30, 2.0 times greater. Using an in-else statement, write a code that calculates the co-op’s gross paycheck for: a) 15 hours worked b) 28 hours worked c) 35 hours worked

On January 1, 2020, ABC Co. paid $800,000 to acquire common shares of XYZ Co., which...

On January 1, 2020, ABC Co. paid $800,000 to acquire common shares of XYZ Co., which represented 30% of XYZ Co.’s shares outstanding. The value of XYZ’s net assets was $1,850,000 on that date. The excess of the purchase price over ABC’s share of XYZ’s net assets is attributed to unrecorded intangibles with a 20-year life. XYZ earned net income and comprehensive income of $400,000 in 2020 and paid dividends of $80,000. The investment in XYZ had a fair value...

A physician orders pre-op blood work to make sure that the patient's potassium level is not...

A physician orders pre-op blood work to make sure that the patient's potassium level is not too low for surgery, which could cause arrhythmia or cardiac arrest. Without the knowledge of the physician, the patient actually has a potassium level that disqualifies him as a candidate for surgery. The phlebotomist draws the tubes, filling the lavender-top tube before the serum tube. The laboratory tests the specimen, unaware that it has been cross-contaminated, reports out a normal potassium level. The physician...

Subjects