Ethics in Action Edward Seymour is a financial consultant to cornish Inc, Areal estate syndicate, Cornish finances and develops commercial real estate(office buildings) projects. The completed projects are then sold as limited partnership interests to individual investors. The syndicate makes a profit on the sale of these partnership interests. Edward provides financial information for prospective investors in a document called the offering "prospectus" This document discusses the financial and legal details of the limited partnership investment. one of the company's current projects, called JEDI 2, Has the partnership borrowing money from a local bank to build a commercial office building. The inerest rate on the loan is 6.5% for the first four years. After four years. The interest rate jumps to 15% for the remaining 20years of the loan The intrest expense is one of the major costs of this project and significantly affects the number of reenters needed for the project to break even, In the propectus Edward has prominently reported that the break even occupancy for the first four years is 65% this is the amount of office space that must be leased to cover the interest and general upkeep costs during the first four years . The 65% break-even point is very low comapred to similar projects and thus communicates a low risk to potential investors. Edward uses the 65% break-even rate as a major marketing tool in selling the limited partership interests. Burried in the fine print of the prospectus is additional indormation that would allow an astute investor to determine that the break-even occupancy jumps to 95% after the fourth year when the interest rate on the loan increases to 15%. Edward belives prospective investors are adequately informed of the investment's risk. Is Edward behaving ethicallt? Explain your answer.
Ethics in Action
Edward Seymour is a financial consultant to cornish Inc, Areal estate syndicate, Cornish finances and develops commercial real estate(office buildings) projects. The completed projects are then sold as limited partnership interests to individual investors. The syndicate makes a profit on the sale of these partnership interests. Edward provides financial information for prospective investors in a document called the offering "prospectus" This document discusses the financial and legal details of the limited partnership investment.
one of the company's current projects, called JEDI 2, Has the partnership borrowing money from a local bank to build a commercial office building. The inerest rate on the loan is 6.5% for the first four years. After four years. The interest rate jumps to 15% for the remaining 20years of the loan The intrest expense is one of the major costs of this project and significantly affects the number of reenters needed for the project to break even, In the propectus Edward has prominently reported that the break even occupancy for the first four years is 65% this is the amount of office space that must be leased to cover the interest and general upkeep costs during the first four years . The 65% break-even point is very low comapred to similar projects and thus communicates a low risk to potential investors. Edward uses the 65% break-even rate as a major marketing tool in selling the limited partership interests. Burried in the fine print of the prospectus is additional indormation that would allow an astute investor to determine that the break-even occupancy jumps to 95% after the fourth year when the interest rate on the loan increases to 15%. Edward belives prospective investors are adequately informed of the investment's risk.
Is Edward behaving ethicallt? Explain your answer.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
