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Requirement 1 | |||
Land | |||
Purchase price (determined below) | $ 1,055,300 | ||
Closing costs | $ 37,000 | ||
Removal of old building | $ 87,000 | ||
Clearing and grading | $ 67,000 | ||
$ 1,246,300 | |||
Purchase price of land: | |||
Cash paid | $ 370,000 | ||
Value of note (From below working) | $ 685,300 | ||
$ 1,055,300 | |||
Present value of note payment: | |||
PV = $770,000 (.89000) | $ 685,300 | ||
Present value of $1: n = 2, i = 6% | |||
Land improvements | |||
Parking lot and landscaping | $ 370,000 | ||
Building | |||
Construction expenditures: | |||
5/1 | $ 3,750,000 | ||
7/1 | $ 2,350,000 | ||
9/1 | $ 1,920,000 | ||
10/1 | $ 2,820,000 | ||
Total expenditures | $ 10,840,000 | ||
Interest capitalized (determined below) | $ 301,750 | ||
Total cost of building | $ 11,141,750 | ||
Average accumulated expenditures: | |||
May 31, 2018 | $3,750,000 x 6/6 = | $ 3,750,000 | |
July 30, 2018 | 2,350,000 x 3/6 = | $ 1,175,000 | |
September 1, 2018 | 1,920,000 x 2/6 = | $ 640,000 | |
October 1, 2018 | 2,820,000 x 1/6 = | $ 470,000 | |
$ 6,035,000 | |||
Interest capitalized: | |||
$6,035,000 x6% x 6/12 = | $ 301,750 | ||
Equipment and furniture and fixtures | |||
Initial | |||
Percent of Total | Valuation | ||
Fair Value | Fair Value | % x $770,000 | |
Equipment | $ 522,000 | 0.60 | $ 462,000 |
Furniture & fixtures | $ 348,000 | 0.40 | $ 308,000 |
Totals | $ 870,000 | 1.00 | $ 770,000 |
Initial valuation: | |||
Equipment | $ 462,000 | ||
Furniture & fixtures | $ 308,000 | ||
Requirement 2 | |||
Interest expense: | |||
Note issued to purchase land and building, | |||
$685,300 x 6% x 9/12 = | $ 51,398 | ||
Construction loan, $6,100,000 x 10% x 8/12 | $ 244,000 | ||
Long-term note, $3,700,000 x 7% | $ 259,000 | ||
Long-term bonds, $5,700,000 x 4% | $ 228,000 | ||
Total | $ 782,398 | ||
Less: Interest capitalized (determined above) | $ -301,750 | ||
Interest expense | $ 480,648 |
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