ZuoTi.Pro
Question

Please show details of solution. Thanks Ann purchased a property for $1,000,000. She bought the property...

Please show details of solution. Thanks

Ann purchased a property for $1,000,000. She bought the property at a 6.00% cap rate.

She finances the purchase with an Interest Only senior loan at 50% LTV at an interest rate of 4.00%.

She also decides to get subordinate / mezzanine financing for 20% of the capital stack (from 50%-70% LTV) at 8.00% interest only.

What is the weighted average cost of Ann’s debt?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

1. Value of Interest only Loan = Property Value * 50% = 1000000 * 50% = 500000

2. Value of Subordinate Financing = Property Value * 20% = 1000000 * 20% = 200000

3. weighted average cost of Ann’s debt = Weight of Loan 1 * Cost of Loan 1 + Weight of Loan 2 * Cost of Loan 2

weighted average cost of Ann’s debt = 5000000/7000000 * 4% + 2000000/7000000 * 8%

weighted average cost of Ann’s debt = 5.14%

Please dont forget to upvote

0 0
Add a comment
Know the answer?
Add Answer to:
Please show details of solution. Thanks Ann purchased a property for $1,000,000. She bought the property...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Please answer question 1,2,3 in details and explanation CASE 4 HELPING HAND ACCOUNTING FUNDAMENTALS "I got...

    Please answer question 1,2,3 in details and explanation CASE 4 HELPING HAND ACCOUNTING FUNDAMENTALS "I got real lucky when I was fired," William Pendleton was fond of telling his employees and business associates. Pendleton was an insurance salesman in Illinois nea hobby, he loved to tinker around the house and he developed a local reputation as a person who knew how to "fix things." Pendleton decided to capitalize on this reputation and opened a hardware store, Helping Hand, based on...

  • Please read the facts of the case and prepare answers for the following questions : 1...

    Please read the facts of the case and prepare answers for the following questions : 1 – What is the relevance of the $2,000 monthly payment to Dave Verden on the analysis of Jones’ financing needs? 2 – What metrics could you use to compare the historical financial results for Jones with the projected financial results under the four defined scenarios? 3 – Other than financing needs, what other issues should Jones address as he considers the different growth scenarios?...

  • Please read the article and answer about questions. You and the Law Business and law are...

    Please read the article and answer about questions. You and the Law Business and law are inseparable. For B-Money, the two predictably merged when he was negotiat- ing a deal for his tracks. At other times, the merger is unpredictable, like when your business faces an unexpected auto accident, product recall, or government regulation change. In either type of situation, when business owners know the law, they can better protect themselves and sometimes even avoid the problems completely. This chapter...

  • CASE 20 Enron: Not Accounting for the Future* INTRODUCTION Once upon a time, there was a...

    CASE 20 Enron: Not Accounting for the Future* INTRODUCTION Once upon a time, there was a gleaming office tower in Houston, Texas. In front of that gleaming tower was a giant "E" slowly revolving, flashing in the hot Texas sun. But in 2001, the Enron Corporation, which once ranked among the top Fortune 500 companies, would collapse under a mountain of debt that had been concealed through a complex scheme of off-balance-sheet partnerships. Forced to declare bankruptcy, the energy firm...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT