Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1. Build a proforma using the information provided in the following scenario. You plan to sell the property at the end of year 3. Round

1. Build a proforma using the information provided in the following scenario. You plan to sell the property at the end of year 3. Round numbers to one decimal only.

You have found an investment opportunity to purchase a property of 30,000 net square

feet zoned for retail in an upcoming location.

  • Monthly retail rents in that area are$5 per square foot and you expect they will grow by 4% every year.
  • Annual expenses are $30 per net square foot escalating at 5% per year.
  • The expected vacancy rate is 12% for the first two years and 9% for the following two years.
  • You expect to incur capital expenses of $60,000 in year 2 and $80,000 in year 4.
  • The loan-to-value (LTV) is 65%, the original loan amount is $5,000,000, paid over 25 years. The annual mortgage interest rate is 5%.
  • Property taxes are fixed for the first three years at $150,000 and will increase by 2% in year 4.
  • Your annual discount rate is 11%.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Essentials of Investments

Authors: Zvi Bodie, Alex Kane, Alan J. Marcus

10th edition

77835425, 978-0077835422

More Books

Students also viewed these Finance questions

Question

Provide examples of the subject matter of an assurance engagement.

Answered: 1 week ago