Question
In: Finance
Financing Building Costs of Saint Louis University: Saint Louis University is building a $13,000,000 office and...
Financing Building Costs of Saint Louis University:
Saint Louis University is building a $13,000,000 office and classroom building in St. Louis in Missouri, and is planning to finance the construction at an 80% loan-to-value ratio, meaning that the borrowed money corresponds to 80% of the value of the building. The balance of 20% will be paid in cash up front. This loan has a ten-year maturity, calls for monthly payments, and is contracted at an interest rate of 7%.
Using the above information, answer the following questions.
1. What is the monthly payment?
Answer:
2. Using the provided Excel file, construct the amortization table in the spread "Sheet2".
3. How much of the first payment is interest?
Answer:
4. How much of the first payment is principal?
Answer:
5. How much will Saint Louis University owe on this loan after making monthly payments for three years (the amount owed immediately after the thirty-sixth payment)?
Answer:
6. Should this loan be refinanced after three years with a new seven-year 6% loan, if the cost to refinance is $210,000? (This means that the refinance cost must be added to the owed amount at the end of three years). To make this decision, calculate the new loan payments and then the present value of the difference in the loan payments.
Answer:
7. Returning to the original ten-year 7% loan, how much is the loan payment if these payments are scheduled for quarterly rather than monthly payments?
Answer:
8. For this loan with quarterly payments, how much will Saint Louis University owe on this loan after making quarterly payments for three years (the amount owed immediately after the twelfth payment)? (Hint: you can use the provided Excel file and do the estimations in the spread "Sheet3")
Answer:
9. What is the effective annual rate (EAR) on the original ten-year 7% loan?
Answer:
10. For the original ten-year 7% loan, how much is paid in interest over the entire life of the loan?
Answer:
11. For the ten-year 7% loan, what is the total construction cost including financial cost?
Answer:
Write it on an excel spreadsheet showing the formulas.
Solutions
Expert Solution
Since there are multiple questions and the questions to be answered are not specified, the first 5 questions are answered.
Given:
Total cost of construction = $13,000,000
Loan = 80% * 13,000,000 = $ 10,400,000
Interest rate = 7%
Tenure = 10 years
Let us prepare an ammortization schedule for the given loan in the spreadsheet as follows to answer the questions:
The formulas used are :
PMT for monthly payment calculation,
PPMT for Principal payment calculation for each period.
IPMT for Interest Payment calculation for each period.
The interest rate is divided by 12 inorder to get the Interest rate per month
The whole loan tenure in monthe = 10 * 12 = 120 months
Amortization schedule:
| Inputs | Calculations | ||||
| Total cost of construction | 13,000,000 | Interest rate per month | 0.00583 | ||
| Loan (% of Total cost ) | 80% | Tenure (months) | 120 | ||
| Loan (Amount) | 10,400,000 | ||||
| Interest rate | 7% | ||||
| Tenure (Years) | 10 | ||||
| Ammortization Schedule | |||||
| Month | Balance (Start) | Monthly Payment | Prinicipal Payment | Interest Payment | Balance (End) |
| 1 | 10,400,000 | $120,752.82 | $60,086.15 | $60,666.67 | 10,339,913.85 |
| 2 | 10,339,913.85 | $120,752.82 | $60,436.65 | $60,316.16 | 10,279,477.19 |
| 3 | 10,279,477.19 | $120,752.82 | $60,789.20 | $59,963.62 | 10,218,687.99 |
| 4 | 10,218,687.99 | $120,752.82 | $61,143.81 | $59,609.01 | 10,157,544.19 |
| 5 | 10,157,544.19 | $120,752.82 | $61,500.48 | $59,252.34 | 10,096,043.71 |
| 6 | 10,096,043.71 | $120,752.82 | $61,859.23 | $58,893.59 | 10,034,184.48 |
| 7 | 10,034,184.48 | $120,752.82 | $62,220.08 | $58,532.74 | 9,971,964.40 |
| 8 | 9,971,964.40 | $120,752.82 | $62,583.03 | $58,169.79 | 9,909,381.38 |
| 9 | 9,909,381.38 | $120,752.82 | $62,948.09 | $57,804.72 | 9,846,433.28 |
| 10 | 9,846,433.28 | $120,752.82 | $63,315.29 | $57,437.53 | 9,783,117.99 |
| 11 | 9,783,117.99 | $120,752.82 | $63,684.63 | $57,068.19 | 9,719,433.36 |
| 12 | 9,719,433.36 | $120,752.82 | $64,056.12 | $56,696.69 | 9,655,377.24 |
| 13 | 9,655,377.24 | $120,752.82 | $64,429.78 | $56,323.03 | 9,590,947.46 |
| 14 | 9,590,947.46 | $120,752.82 | $64,805.62 | $55,947.19 | 9,526,141.83 |
| 15 | 9,526,141.83 | $120,752.82 | $65,183.66 | $55,569.16 | 9,460,958.17 |
| 16 | 9,460,958.17 | $120,752.82 | $65,563.90 | $55,188.92 | 9,395,394.28 |
| 17 | 9,395,394.28 | $120,752.82 | $65,946.35 | $54,806.47 | 9,329,447.93 |
| 18 | 9,329,447.93 | $120,752.82 | $66,331.04 | $54,421.78 | 9,263,116.89 |
| 19 | 9,263,116.89 | $120,752.82 | $66,717.97 | $54,034.85 | 9,196,398.92 |
| 20 | 9,196,398.92 | $120,752.82 | $67,107.16 | $53,645.66 | 9,129,291.76 |
| 21 | 9,129,291.76 | $120,752.82 | $67,498.62 | $53,254.20 | 9,061,793.14 |
| 22 | 9,061,793.14 | $120,752.82 | $67,892.36 | $52,860.46 | 8,993,900.78 |
| 23 | 8,993,900.78 | $120,752.82 | $68,288.40 | $52,464.42 | 8,925,612.39 |
| 24 | 8,925,612.39 | $120,752.82 | $68,686.75 | $52,066.07 | 8,856,925.64 |
| 25 | 8,856,925.64 | $120,752.82 | $69,087.42 | $51,665.40 | 8,787,838.22 |
| 26 | 8,787,838.22 | $120,752.82 | $69,490.43 | $51,262.39 | 8,718,347.79 |
| 27 | 8,718,347.79 | $120,752.82 | $69,895.79 | $50,857.03 | 8,648,452.00 |
| 28 | 8,648,452.00 | $120,752.82 | $70,303.52 | $50,449.30 | 8,578,148.49 |
| 29 | 8,578,148.49 | $120,752.82 | $70,713.62 | $50,039.20 | 8,507,434.87 |
| 30 | 8,507,434.87 | $120,752.82 | $71,126.11 | $49,626.70 | 8,436,308.75 |
| 31 | 8,436,308.75 | $120,752.82 | $71,541.02 | $49,211.80 | 8,364,767.74 |
| 32 | 8,364,767.74 | $120,752.82 | $71,958.34 | $48,794.48 | 8,292,809.40 |
| 33 | 8,292,809.40 | $120,752.82 | $72,378.10 | $48,374.72 | 8,220,431.30 |
| 34 | 8,220,431.30 | $120,752.82 | $72,800.30 | $47,952.52 | 8,147,631.00 |
| 35 | 8,147,631.00 | $120,752.82 | $73,224.97 | $47,527.85 | 8,074,406.03 |
| 36 | 8,074,406.03 | $120,752.82 | $73,652.12 | $47,100.70 | 8,000,753.91 |
| 37 | 8,000,753.91 | $120,752.82 | $74,081.75 | $46,671.06 | 7,926,672.16 |
| 38 | 7,926,672.16 | $120,752.82 | $74,513.90 | $46,238.92 | 7,852,158.26 |
| 39 | 7,852,158.26 | $120,752.82 | $74,948.56 | $45,804.26 | 7,777,209.70 |
| 40 | 7,777,209.70 | $120,752.82 | $75,385.76 | $45,367.06 | 7,701,823.94 |
| 100 | 2,380,124.27 | $120,752.82 | $106,868.76 | $13,884.06 | 2,273,255.51 |
| 101 | 2,273,255.51 | $120,752.82 | $107,492.16 | $13,260.66 | 2,165,763.34 |
| 102 | 2,165,763.34 | $120,752.82 | $108,119.20 | $12,633.62 | 2,057,644.15 |
| 103 | 2,057,644.15 | $120,752.82 | $108,749.89 | $12,002.92 | 1,948,894.25 |
| 104 | 1,948,894.25 | $120,752.82 | $109,384.27 | $11,368.55 | 1,839,509.98 |
| 105 | 1,839,509.98 | $120,752.82 |
$110,022.34<
 jeff jeffy answered 1 year agoRelated SolutionsAlexander Industries is considering purchasing an insurance policy for its new office building in St. Louis,...Alexander Industries is considering purchasing an insurance
policy for its new office building in St. Louis, Missouri. The
policy has an annual cost of $10,000. If Alexander Industries
doesn’t purchase the insurance and minor fire damage occurs, a cost
of $100,000 is anticipated; the cost if major or total destruction
occurs is $200,000. The costs, including the state-of-nature
probabilities, are as follows: Damage Decision Alternative None
minor major s1 s 2 s 3 Purchase Insurance, d 1 10,000 10,000 10,000...
Alexander Industries is considering purchasing an insurance policy for its new office building in St. Louis, Missouri.Alexander Industries is considering purchasing an insurance
policy for its new office building in St. Louis, Missouri. The
policy has an annual cost of $10,000. If Alexander Industries
doesn’t purchase the insurance and minor fire damage occurs, a cost
of $100,000 is anticipated; the cost if major or total destruction
occurs is $200,000. The costs, including the state-of-nature
probabilities, are as follows:NoneMinorMajorDecision Alternatives1s2s3Purchase insurance, d110,00010,00010,000Do not purchase insurance, d20100,000200,000Probabilities0.960.030.01What lottery would you use to assess utilities? (Note:
Because the data...
Ben Ryatt, professor of languages at a southern university, owns a small office building adjacent to...
Ben Ryatt, professor of languages at a southern university, owns
a small office building adjacent to the university campus. He
acquired the property 12 years ago at a total cost of
$670,000—$62,000 for the land and $608,000 for the building. He has
just received an offer from a realty company that wants to purchase
the property; however, the property has been a good source of
income over the years, so Professor Ryatt is unsure whether he
should keep it or...
Raul Martinas, a professor of languages at Eastern University, owns a small office building adjacent to...Raul Martinas, a professor of languages at Eastern University,
owns a small office building adjacent to the university campus. He
acquired the property 10 years ago at a total cost of $669,500—that
is, $90,500 for the land and $579,000 for the building. He has just
received an offer from a realty company that wants to purchase the
property; however, the property has been a good source of income
over the years, and so Martinas is unsure whether he should keep...
Raul Martinas, a professor of languages at Eastern University, owns a small office building adjacent to...
Raul Martinas, a professor of languages at Eastern University,
owns a small office building adjacent to the university campus. He
acquired the property 10 years ago at a total cost of $530,000—that
is, $50,000 for the land and $480,000 for the building. He has just
received an offer from a realty company that wants to purchase the
property; however, the property has been a good source of income
over the years, and so Martinas is unsure whether he should keep...
Congratulations! You have been hired as a consultant to advise Saint Leo University Hospital leadership on...Congratulations! You have been hired as a consultant to advise
Saint Leo University Hospital leadership on the development of a
Disaster Preparedness and Response Plan. Saint Leo University
Hospital is currently under construction and will celebrate its
grand opening twelve months from the beginning of this course.
Among the many projects to be completed before the hospital
welcomes its first patients is writing the Disaster Preparedness
and Response Plan. For this consultancy, select one of the
following public health emergencies...
Congratulations! You have been hired as a consultant to advise Saint Leo University Hospital leadership on...Congratulations! You have been hired as a consultant to advise
Saint Leo University Hospital leadership on the development of a
Disaster Preparedness and Response Plan. Saint Leo University
Hospital is currently under construction and will celebrate its
grand opening twelve months from the beginning of this course.
Among the many projects to be completed before the hospital
welcomes its first patients is writing the Disaster Preparedness
and Response Plan. For this consultancy, select one of the
following public health emergencies...
Ann wants to buy an office building which costs $2,000,000. She obtains a 30 year fully...Ann wants to buy an office building which costs $2,000,000. She
obtains a 30 year fully amortizing fixed rate
mortgage with 80% LTV, an annual interest rate of 4%, with monthly
compounding and monthly payments.
The mortgage has a 2% prepayment penalty if the borrower prepays
in the first 5 years. Suppose Ann makes the required monthly
payment for 3 years and prepays after her final monthly payment at
the end of 3 years. What is the annual IRR on...
You have purchased a multi-tenant office building for $15,000,000. Your acquisition costs associated with this purchase...You have purchased a multi-tenant office building for
$15,000,000. Your acquisition costs associated with this purchase
are $25,000. The estimated land value is $3,000,000, of which you
estimate the depreciable land portion at $1,000,000. You estimate
the 7-year property at a value of $2,000,000. You have arranged a
70% LTV, 7-year mortgage at a 5.25% interest rate with 2 points and
a 25 year amortization period. Your projected NOI in the next two
years is $1,200,000 and 1,250,000 which includes...
Ann wants to buy an office building which costs $1,000,000. She obtains a 30 year fully...Ann wants to buy an office building which costs $1,000,000. She
obtains a 30 year fully amortizing fixed rate mortgage at 80% LTV,
an annual interest rate of 4%, with monthly compounding and monthly
payments. How much is Ann’s monthly payment?
A. $3,819.32 B. $2,666.67 C. $3,333.33 D. $4,774.15
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
ADVERTISEMENT
|