For the Same Property as Above, Suppose the Underwriting Criteria

question 23

Multiple Choice

For the same property as above, suppose the underwriting criteria is a maximum loan/value ratio LTV) of 75%, and we estimate property value by direct capitalization using a rate of 11% on the stated NOI. By this criterion what is the maximum loan amount?

• A) $2,789,406
• B) $3,409,091
• C) $3,844,614
• D) $4,000,000
• E) $4,139,619

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Definitions:

Factory Overhead

All indirect costs associated with manufacturing, excluding direct materials and direct labor expenses.

Period Cost

Costs that are not directly tied to the production process and are expensed in the period they are incurred.

Variable Production

Production processes or costs that change in proportion to the output level or activity of a company.