1) (2 points)You are looking to purchase a Motel in Wasaga Beach for $4,500,000 at 5.5% cap rate. You have negotiatedwith your lender to obtain a $2,400,000 monthly pay mortgage bearing a nominal 5 year fixed annual interest rateof 4.95%, compounded monthly. The amortization period is 15 years.a) How much is your monthly mortgage payment?b) What would be the mortgage balance of the mortgage after 5 years?2) (1 point)P&A Bank proposes to charge an upfront origination fee to make a proposed commercial mortgage yield of 3.95%,compounded monthly. The loan would be for $6,200,000 on a 15-year fully amortizing basis and the monthlypayments would be based on a rate of 3.39%, compounded monthly. What origination fee should P&A Bank chargeupfront?3) (2 points)Patrick is considering the purchase of a lot. He can buy the lot today and expects the price to rise to $16,100 atthe end of 10 years. He believes that he should earn an investment yield of 8% compounded annually on hisinvestment. The asking price for the lot is $8,000.a) What is the internal rate of return compounded annually on the investment if Patrick purchases theproperty for $8,000 and can sell it 10 years later for $16,100?b) Should he buy the lot?
9) (5 points)You are analyzing an offering memorandum for a 335-unit apartment building. This is exactly the type of welllocated property you are interested in owning and managing. The NOI is forecast to be $3,187,500 in the first yearof ownership (note that in this case NOI is calculated after taking into account vacancy, operating expenses andcapital expenditure reserves) and is projected to grow at 2% per year. The proforma assumes that the propertywould be sold after five years at a 3.5% cap rate, applied to year-6 NOI with no deduction for selling costs on thereversion. Assume that you agree with the cash flow forecast and the underlying assumptions and that yourrequired total return on a Property Before Tax basis is 5.5% per year.a) Estimate the proceeds from the sale of the Property at the end of year 5.b) What is the maximum price that you should pay for this Property?c) If you were to acquire the Property at the price calculated in b) above but were only able to sell it at theend of year 5 at an exit cap rate of 4.25%, what would be the actual IRR? (Assume all other cash flowsare as expected).d) If you were to acquire the Property at the price calculated in b) above but the residual sale took place atan 4.75% exit cap rate, what would be the NPV of the investment?e) If, after considering this analysis, you decide to price the Property on the basis of an 4.25% exit cap rate,what is the maximum price that you should pay?