Question

In: Finance

You are developing a 100,000 sqft industrial building. The bank is financing 60% of the total...

You are developing a 100,000 sqft industrial building. The bank is financing 60% of the total project cost, interest-only at 4%, while the balance is funded by the MP. The draw schedule is as follows

July 2020: 2.0M

August 2020 - March 2021: $1.0M/month

The total budget is $10.0M

Assume the construction interest for a given month is equal to the monthly interest rate times the prior month outstanding balance plus current month draw, for example, October interest = monthly rate*(loan balance in September + October draw). The construction interest is accrued through June 30, 2021. What is the estimate of total construction interest paid by capital partners?

Solutions

Expert Solution

Date Loan Balance Draw Interest
Jun-20 $                           -   Monthly Interest Rate 0.3333%
Jul-20 $      2,000,000.00 $ 2,000,000.00 $      6,666.67
Aug-20 $      3,000,000.00 $ 1,000,000.00 $    10,000.00
Sep-20 $      4,000,000.00 $ 1,000,000.00 $    13,333.33
Oct-20 $      5,000,000.00 $ 1,000,000.00 $    16,666.67
Nov-20 $      6,000,000.00 $ 1,000,000.00 $    20,000.00
Dec-20 $      7,000,000.00 $ 1,000,000.00 $    23,333.33
Jan-21 $      8,000,000.00 $ 1,000,000.00 $    26,666.67
Feb-21 $      9,000,000.00 $ 1,000,000.00 $    30,000.00
Mar-21 $    10,000,000.00 $ 1,000,000.00 $    33,333.33
Total Interest paid by Capital partners $ 180,000.00

Related Solutions

It is estimated that 100,000 bags of cement will be needed in total for a building...
It is estimated that 100,000 bags of cement will be needed in total for a building project. Cement costs at GHS 30 today. It is expected that in one year the price will be GHS 39 per bag to reflect inflation. A bank is willing to lend you money to buy all the cement you need today. However, in one year, you will pay the bank enough money to buy back 110,000 bags. i) What is the real return to...
You currently have $60,000 in your bank account and you will need a total of $100,000...
You currently have $60,000 in your bank account and you will need a total of $100,000 in 5 years to pay for a down payment on a house. What interest rate do you need to earn in order to have $100,000 in your bank account 5 years from now?
You are seeking financing for a $500,000 investment in an apartment building. The NOI in the...
You are seeking financing for a $500,000 investment in an apartment building. The NOI in the first year is projected to be $35,000. The bank is willing to underwrite a fully-amortizing, 30 year fixed rate mortgage with constant monthly payments at an interest rate of 6%, compounded monthly. Please note the following ratio: Debt Coverage Ratio= Net Operating Income/ Annual Debt Service Compute the Debt Coverage Ratio if the bank underwrites a mortgage at a Loan-to-Value Ratio of 75%.
2. A commercial bank has deposits of $100,000 and total reserves of $31,000. The required reserve...
2. A commercial bank has deposits of $100,000 and total reserves of $31,000. The required reserve ratio is 15%. All other banks are fully loaned up. Show this bank’s balance sheet. Calculate actual reserves (AR), required reserves (RR), and excess reserves (ER). What is the largest loan this bank can make? If the initial loan is made, what is the maximum expansion of the money supply that can occur if other banks also lend as much as possible? Where did...
Papa bank offers to lend you RM 100,000 at a nominal rate of 5.0%, with interest paid quarterly. Mama Bank offers to lend you the RM 100,000,
Papa bank offers to lend you RM 100,000 at a nominal rate of 5.0%, with interest paid quarterly. Mama Bank offers to lend you the RM 100,000, but it will charge 6.0%, with interest paid at the end to the year. Compute the difference in the effective annual rates charged by these two bank.
Motivation and Behavior You are in charge of developing a team-building activity to improve collaboration and...
Motivation and Behavior You are in charge of developing a team-building activity to improve collaboration and increased communication for your team members. You are the newly promoted manager. Your department is closing for the day so you have four hours together in a team environment. Review the following details of team members: •Rosanna (46) and Mary (20) are two staff members who do not get along. Rosanna is quiet and a loner. Mary is outspoken, and talks about her personal...
You buy  a recently completed industrial-office building and starting at the beginning of the first year, you...
You buy  a recently completed industrial-office building and starting at the beginning of the first year, you put in a single tenant who pays net rent $50,000 per year at the end of each year on a 5-year triple-net lease.  At the end of the fifth year, if all goes well between you and the tenant, you expect to increase the rent to $70,000 per year, and put the tenant on a 10-year triple-net lease.  After owning the property for 10 years, and...
You are starting a wine company in Kamloops. You need financing from a bank to make...
You are starting a wine company in Kamloops. You need financing from a bank to make the company possible. You are sitting with the loan officer at ABC Bank, Ms. Money Bags. Money asks you a question. “How will the bank know the new company will be a success? That is, what internal financial reporting (managerial accounting) documents / procedures / techniques / policies will your company implement to estimate and monitor your success?” How can you make the bank...
Consider the following: –       You need a $300,000 financing package. –       $150,000 at 9%, 30 Years –       $100,000 at...
Consider the following: –       You need a $300,000 financing package. –       $150,000 at 9%, 30 Years –       $100,000 at 8%, 20 Years –       $50,000 at 7% 10 Years What is the monthly payment for each part of the financing package? What is the IRR on the $300,000 borrowed? Does anybody know how to solve these two questions with details?
You are purchasing a pump for your industrial plant. Your planning horizon is 60 years. There...
You are purchasing a pump for your industrial plant. Your planning horizon is 60 years. There are two pumps under consideration, A and B. Their characteristics are shown in the table below. If the MARR is 10%, what is the present value of the better choice. Note: Either pump A is used for the entire 60 years or pump B is used for the entire 60 years A B Purchase cost $10,000 $16,000 Service life (years) 10 5 Operating cost...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT