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A lender is willing to provide a loan equal to 80% of a property worth $360,000. If such a loan carries an interest rate of 7.5% for a term of 20 years, what is the projected before-tax cash flow? The NOI is $40,000 per year. The 7.5% 20-year annual loan payment factor is .09809. Multiply the OLB by this factor to obtain the annual mortgage payment.a. $11,000b. $11,750c. $15,615d. $28,024

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Answer:

B) $11,750

Explanation:

annual mortgage payment = net operating income - (outstanding loan balance x loan payment factor)

outstanding loan balance = property value x loan percentage

annual mortgage payment = $40,000 - [($360,000 x 80%) x 0.09809] = $40,000 - ($288,000 x 0.09809) = $40,000 - $28,250 = $11,750

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