Question

A business owner wants to purchase an office building of approximately 5,000 square feet. He intends to occupy approximately 3,000 square feet for his home building business and to lease the remaining space in the facility. The negotiated sale price is agreed upon at $875,000. The buyer is approved for a loan with a local bank offering the following terms:

• Loan Amount maximum of 75% of cost

• Fixed Interest Rate of 4.25%

• Monthly payments based on a 20 year amortization

• Term of the Loan is 5 years (Balloon Note)

What is the Sales Price per Square Foot for the purchase?

a. $ 175 b. $ 200 c. $ 225 d. $ 150

What is the beginning loan amount?

a. $700,000 b. $875,000 c. $656,250 d. $612,500

What is the loan payment (rounded to the nearest dollar)?

a. $ 3,228 b. $ 4,064 c. $ 4,937 d. $ 5,418

What is the principal amount that will come due at maturity after 5 years (rounded to the nearest dollar)? Hint: use the rounded payment answer to question before)

a. $ 450,170 b. $ 597,163 c. $ 409,236 d. $ 540,171

Answer #1

1a. A building owner is evaluating the following
alternatives for leasing space in an office building for the next
five years (using a 5% discount rate):
Net lease with steps. Rent will be $10/ square foot
the first year and will increase by $1.50 per square foot each year
until the end of the lease.
Net lease with CPI adjustments. The rent will be $12
/square foot in the first year. After the first year, the rent will
be increased...

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
$770,000—$49,000 for the land and $721,000 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...

Barton Laski, 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
$700,000—$65,000 for the land and $635,000 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 Laski is unsure whether he
should keep it or...

January 1, 2018, Pharoah, Inc. signs a 10-year
noncancelable lease agreement to lease a storage building from Holt
Warehouse Company. Collectibility of lease payments is reasonably
predictable and no important uncertainties surround the amount of
costs yet to be incurred by the lessor. The following information
pertains to this lease agreement.(a) The agreement requires equal
rental payments at the beginning each year.(b) The fair value of
the building on January 1, 2018 is $6,200,000; however, the book
value to Holt...

Jerry needs a mortgage for a house he is building. The house
will be completed in three months, and he will need the mortgage at
that time. Jerry wants a 25-year, fixedrate mortgage in the amount
of $500,000 with monthly payments. Jennifer has agreed to lend
Jerry the money in three months at the current market rate of 5.5
percent, which makes the monthly mortgage payment to be $3,070.44.
However, Jennifer does not have $500,000 available for the loan, so...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 1 minute ago

asked 2 minutes ago

asked 3 minutes ago

asked 4 minutes ago

asked 4 minutes ago

asked 7 minutes ago

asked 7 minutes ago

asked 9 minutes ago

asked 9 minutes ago

asked 14 minutes ago

asked 17 minutes ago

asked 20 minutes ago