BORROW THROUGH A PERSONAL LINE OF CREDIT SECURED BY COMPANY SHARESB...

4. Borrow through a personal line of credit secured by company shares

B. Select the monetization strategy that will most likely achieve all of Gonzalez’s objectives.

Identify, for each strategy not selected, one objective it fails to achieve.

8 minutes (Answer 7-B on page 43)

Gonzalez personally owns several real estate holdings in another country in which the capital

gains tax rate is 30%. One of these holdings is land with a current market value of

USD 15,000,000. She wants to utilize its value to generate liquidity. Gonzalez considers

monetizing her property through either a mortgage financing or a sale and leaseback.

The property has a cost basis for tax purposes equal to 15% of its current market value.

Gonzalez can achieve a loan-to-value ratio of 75% through a mortgage financing at an

8% interest rate. Lease payments and mortgage interest are both deductible for tax purposes.

Gonzalez wants to determine how much liquidity each method will generate upon closing.

C. Calculate the initial net proceeds (in USD) of each of the following methods:

i. mortgage financing

ii. sale and leaseback

6 minutes (Answer 7-C on page 44)

Page 42 Level III

Answer Question 7-A on This Page