Question

1. A borrower made a mortgage loan 7 years ago for $160,000 at 10.25% interest for 30 years and is considering refinancing. The loan balance is now $151,806.62 and rates for this amount are currently 9.0% for 23 years. Origination fees and closing costs are $4,500 and these costs are not financed by the lender. What is the effective cost of refinancing?

Potential Gross Income 100,000 sq. ft for the coming year
average rent $15.00 per ft.	$   1,500,000
Less Vacancy Allowance (average 8%)	$     (120,000)
Effective Gross Income	$   1,380,000
Cleaning expenses (5% of net rev)	$      (69,000)
Insurance ($ 0.02 per dollar replacement, R.C. = $40 per ft.	$      (80,000)
Management & Maintenance (11% of revenue)	$    (151,800)
Reserve for Replacement (savings for major repairs)	$      (50,000)
Property Taxes ($0.10 per $100 of R.C.)	$          (4,000)
	$    (354,800)
Estimated Net Operating Income	$   1,025,200

What is the NPV of this investment at a discount rate of 12% (use the purchase price from the question #1 above the balance sheet) ?

Answer 1

You have asked multiple unrelated questions in the same post. I have addressed the first question. Please post the balance questions, separately, one by one.

Q - 1

PMT = PMT (Rate, Nper, PV, FV) = PMT (9%/12, 12 x 23, -151806.62, 0) =  1,304.43

Net proceeds in the hand of the borrower = 151806.62 - 4,500 =  147,306.62

Hence, the effective cost of refinancing = 12 x Rate (Nper, PMT, PV, FV) = 12 x Rate (12 x 23, 1304.43, - 147306.62, 0) = 9.39%