(3) Fill in the sheet titled NPV-IRR. Ann will buy the property in 2014, she will collect NOI for 5 years 2015-2019, and she will sell it in 2019. Anns loan has a 5/4/3/2/1 prepayment penalty structure, so if she prepays in the first year, she will pay a penalty equal to 5% of the balance, in the second year she will pay a penalty equal to 4% of the balance etc. Ann forecasts NOI will grow at 2% per year, compounded annually. Ann forecasts she can sell the property in 2019 at a 6.25% cap rate. Recall: Sale Price in 2019=(NOI_2020)/(cap rate_2019 ) (3.a) How much will Ann sell the property for in 2019? (3.b) How much of a capital gain will Ann earn? (Hint: capital gain = sale price purchase price) (3.c) What is Anns IRR for this investment? (3.d) If Anns discount rate is 25%, what is her NPV? Should she make this investment? (3.e) Plot Anns NPV for discount rates 0%-100%. Copy and paste the chart below.

AutoSave OFF Project 2 George Gelashvili Home Insert Draw Page Layout Formulas Data Review View Tell me Share Comments 5 X LG Calibri (Body) v 11 a Wras Text VA A Currency v SB + 280 4 Paste B 1 U A -- Merge & Center Inzert Delete Format Conditional Format Cell Formatting as Table Styles Sort Filter Ideas Find & Select F23 X T fx =E$18-NPV(SE23,F$18:J$18) c B c D E F G H 1 1 K M N Investment Analysis Year 2014 2015 2016 2017 2019 2019 2020 A 1 Inputs 2 Purchase price 3 Purchase Costs 4 Loan amount 5 Laan Clasing Costs 6 Prepayment Penalty 7 Debt Service 8 NCU 2015 9 Going in cap rate 2014 10 NCI growth rate 11 Exit cap rata 2019 12 Selling Costs 13 14 15 16 17 19 $11,822,261.54 3.00% $26,600,000.00 1.65% 5/4/3/2/1X/0% $1.529,500.00 $763,447.00 G.50% 2.00% 6.25% 7.00 Purchase price Purchase Costs Loan Amount Laan lasing Costs Net Operating income INCI) Debt Service Payment Capital Cair $ 50.00 Sale Price Selling Cours Loan Balance Repaid Loan Prepayment Pendly Net Cash Flow Sum of Ne: Cash flow $0.00 IRR 15 20 2: 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 35 40 40 42 43 44 Discount Nale NPV 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% % 45.00% 50.00% $0.00 $0.00 50.00 $0.00 S0.00 $ 50.00 $0.00 SOOD $0.00 Soon $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 50.00 55.00% 50.00% 05.00 70.00% 75.00% 90.00% 85.00% 90.00% 95.00% % 100.00% NOI Underwriting NPV-IRR Loan Analysis + . + 100%