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Compute the capitalization rate for the following financing proposal:
First mortgage loan - 60% of value at a 4% rate, amortizing over 30 years -interest only 2 years
Second mortgage loan (mezzanine debt) - 20% of value, 12% interest only for 5 years
Equity for 20% of value with an assumed opportunity cost of 18%
Assume a combined 35% tax rate for the borrower.
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