1. You are acquiring and redeveloping a 300 room hotel at total basis of $75MM on 12/31/2019. It is expected that in 2020, the project will generate total net operating income of $7.5MM, with the first distribution occurring on 12/31/2020. Assume that net operating income does not increase during the investment horizon and that distributions occur only at year-end. Assume the property is sold on 12/31/2024 using an 8.00% capitalization rate. a. Model the distributable cash flows and calculate the sales price of the asset b. Calculate the unlevered net present value of the investment assuming a 9% unlevered cost of capital. c. Calculate the internal rate of return. d. Should you do the project? Why? Be sure to describe the decision rule(s) you are using e. What is the investment value of the asset from your perspective. How does this differ from the acquisition basis? Please Answer-Problem #21 # 1 is only listed 2. In a new tab, using the assumptions above, assume that you are able to borrow at 65% Loan-to-Cost at 7.00% simple annual interest, interest only, with a balloon payment at maturity on 12/31/2024. a. Model the interest payments and show the cash flow waterfall during the investment horizon and at liquidation of the asset. b. Calculate the levered net present value of the investment assuming an 18% levered cost of capital. C. Calculate the internal rate of return. d. Should you do the project? Why? Be sure to describe the decision rule(s) you are using. e. What is the maximum per key basis at which you would do the project? 1. You are acquiring and redeveloping a 300 room hotel at total basis of $75MM on 12/31/2019. It is expected that in 2020, the project will generate total net operating income of $7.5MM, with the first distribution occurring on 12/31/2020. Assume that net operating income does not increase during the investment horizon and that distributions occur only at year-end. Assume the property is sold on 12/31/2024 using an 8.00% capitalization rate. a. Model the distributable cash flows and calculate the sales price of the asset b. Calculate the unlevered net present value of the investment assuming a 9% unlevered cost of capital. c. Calculate the internal rate of return. d. Should you do the project? Why? Be sure to describe the decision rule(s) you are using e. What is the investment value of the asset from your perspective. How does this differ from the acquisition basis? Please Answer-Problem #21 # 1 is only listed 2. In a new tab, using the assumptions above, assume that you are able to borrow at 65% Loan-to-Cost at 7.00% simple annual interest, interest only, with a balloon payment at maturity on 12/31/2024. a. Model the interest payments and show the cash flow waterfall during the investment horizon and at liquidation of the asset. b. Calculate the levered net present value of the investment assuming an 18% levered cost of capital. C. Calculate the internal rate of return. d. Should you do the project? Why? Be sure to describe the decision rule(s) you are using. e. What is the maximum per key basis at which you would do the project
