A commercial real estate developer plans to borrow money to finance an upscale mall in an exclusive area of the city. The develo
per plans to get a loan that will be repaid with uniform payments of $475,000 beginning in year 2 and ending in year 16. How much will a bank be willing to loan at an interest rate of 7% per year
1 answer:
Answer:
$4,043,232.85
Explanation:
First we have to compute the present value which is attached in the spreadsheet
Given that,
Future value = $0
Rate of interest = 7%
NPER = 15 years
PMT = $475,000
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
So, after solving this, the present value is $4,326,259.15
No the loan amount would be
= (Present value) ÷ (1 + interest rate)
= $4,326,259.15 ÷ 1.07
= $4,043,232.85
You might be interested in
Answer:
$291.56
Explanation:
Find the dividend amount per year;
D1 = D0(1+g ) = 3.40(1+0) = 3.40
D2 = 3.40*(1.05) =3.57
D3 = 3.57*(1.05) =3.7485
D4= 3.7485*(1.15) = 4.3108
D5 = 4.3108 *(1.10) = 4.7419
Find the Present value of each year's dividend;
PV (of D1) = 3.40/ (1.14 ) = 2.9825
PV (of D2) = 3.57/ (1.14² ) = 2.7470
PV (of D3) = 3.7485/ (1.14³ ) = 2.5301
PV (of D4) = 4.3108/ (1.14^4 ) = 2.5523
PV (of D5 onwards)
PV (of D5 onwards) = 280.7519
Next, sum up the PVs to find the maximum price of this stock;
= 2.9825 + 2.7470 + 2.5301 + 2.5523 + 280.7519
= 291.564
Therefore, an investor should pay $291.56