Working At Workouts Case Study Analysis
Benefits:
Driven has a legal right to revoke ownership and acquire ownership: Schey understands that in Georgia; this will allow Drive to become owner in less than two months.
The appointment of the consignee is a viable option and can be completed within a few days of delivery.
Because this loan has a term, other Burton assets may have other assets in Drive, and Schey does not want to give up this option.
Discounted Payoff from FCSB:
Costs:
The costs associated with this option belongs to the renewal of debt before the time of maturity, leading to the acceptance of loan in full amount by lender, but increases the time period for the loan, which leads to an additional interest payment, considered as additional costs.
Benefits:
The benefits associated with this option is a decreased in modified interest rates from 6 percent to 4 percent before the time of maturity, which leads to the acceptance of loan in full amount by lender, which helps in mitigating the risks of being defaulter.
Past due principal and Interest:
Costs:
The costs associated with this option is belongs to the addition of past due payments attached with the principals and interest payments are added back to the outstanding balance, which might increase the burden attached with the interests and principal amount of the loan.
Benefits:
The benefit associated with this option is belongs to the payment of the delinquent payment for property taxes approximately 6000 dollars per month by the borrower.
Past due principal and Interest:
Costs:
The costs associated with this option is belong s to the modification of maturity date in the form of the renewal of debt before the time of maturity, which leads to the acceptance of loan in full amount by lender but increases the time period for the loan, which leads to an additional interest payment, considered as additional costs.
Benefits:
The benefits associated with this option is belongs to the mitigation and avoidance for being a defaulter by taking the more time for paying the debt associated with the property.
Quantitative Analysis:
Northwinds Community Crossing is a property located on the outskirts of Savannah, Georgia, and is a renowned and well-established shopping center measuring 12,209 square feet. The mall offers seven seats for tenants and was 100 percent occupied. Tenants of the property reimburse all expenses, with the exception of property tax, the cash flow of the property is highly dependent on the victory of the native community.
The property is situated in the Latin American market, and rental sales have declined significantly due to the downfall of the construction industry and severesettlement laws. Due to declining sales, in order to retain households, owners explicitly allow households to reduce payments.
After considering the above mentioned facts and figures and after the constructionof some assumptions, the net present value (NPV) of the property is estimated at $4,850,847 with the internal rate of return (IRR) of around 42 percent. The calculation assumes that the lessee will not receive a discount after the end of the current lease period. In addition, the rent will remain unchanged for five years. Rental income is distributed over a period of less than one year and furthermore, it has been assumed that the similar tenant will renew the rental contract after the end of the period.
Recommendations:
After considering all facts and figures and making some assumptions, it has been concluded that it should go with the renewal of the loan, which providesbenefits in the form of a decrease in modified interest rates from 6 percent to 4 percent before the time of maturity, which leads to the acceptance of loan in full amount by lender; further helping to mitigate the risks of being defaulter. Along with that, the net present value (NPV) of the property is estimated at $4,850,847 with the internal rate of return (IRR) of around 42 percent, which is the good and positive sign of the company to go with the property and renewal of loan before the maturity date..........................................
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