Project Funding
Chapter 12 – Project Funding 1. What is the present level of the prime rate? How does this rate relate to the current financing and overdraft charges for new building construction in your loyalty? (How many points above the prime is this rate?) Does this overdraft rate vary with the magnitude of the monies involved?
The present level of the prime rate is 3.25%. The prime rate is the primary took which influences the interest rates thus the economy. The more money which is placed in the bond the higher the interest rate will be. 2. Referring to the example in Figure 12.2a, suppose the market rent for a two-bedroom unit is $550 per month and for a three-bedroom unit is $650 per month. If the going cap rate is 10%, rework the pro forma calculations for the apartment project of Figure 8.2. Then determine the lender’s interest rate. What is the new breakeven vacancy factor?
The total estimated monthly income would be $43,250 and other income would remain the same at $150. The annual total would be $520,800 and after the less vacancy factor the amount will decrease to $494,760. Therefore the net income will be $349,053.18 3. What determines the number of draws a builder can make in completing a facility? What is the existing policy regarding number of draws in your locality?
The amount for each draw is based on the specific cost breakdown for the project. The builder can take out a draw after he completes a portion of the project. You cannot take out more that 5% of the total contract amount. 4. Suppose that for the multipurpose sports stadium example considered in the text, the bond issue was for 40 years and the annual interest rate is 9% of the bond principle. Using the architect’s estimate of cost of $41 million, determine the effective interest rate.
For a multipurpose sports stadium, a bond is issued for 40 years at an annual rate of 9%, the architect estimate for this project is 41 million dollars, the effective interest rate will be 8.2
The present level of the prime rate is 3.25%. The prime rate is the primary took which influences the interest rates thus the economy. The more money which is placed in the bond the higher the interest rate will be. 2. Referring to the example in Figure 12.2a, suppose the market rent for a two-bedroom unit is $550 per month and for a three-bedroom unit is $650 per month. If the going cap rate is 10%, rework the pro forma calculations for the apartment project of Figure 8.2. Then determine the lender’s interest rate. What is the new breakeven vacancy factor?
The total estimated monthly income would be $43,250 and other income would remain the same at $150. The annual total would be $520,800 and after the less vacancy factor the amount will decrease to $494,760. Therefore the net income will be $349,053.18 3. What determines the number of draws a builder can make in completing a facility? What is the existing policy regarding number of draws in your locality?
The amount for each draw is based on the specific cost breakdown for the project. The builder can take out a draw after he completes a portion of the project. You cannot take out more that 5% of the total contract amount. 4. Suppose that for the multipurpose sports stadium example considered in the text, the bond issue was for 40 years and the annual interest rate is 9% of the bond principle. Using the architect’s estimate of cost of $41 million, determine the effective interest rate.
For a multipurpose sports stadium, a bond is issued for 40 years at an annual rate of 9%, the architect estimate for this project is 41 million dollars, the effective interest rate will be 8.2