A real estate broker is offering a commercial property building for sale that has the following characteristics: a. The purchase price is $5.5M, with land valued at $500,000 (part of the $5.5M ). b. The 210 commercial units rent for $750 per month with rent expected to increase by 3% per year starting at year 2 . c. Vacancy and collection loss allowance is 8% of the potential gross income. d. Operating expenses are expected to be 38% of effective gross income. e. The real estate agent estimates that the value of the property, net of selling expenses, will be $6.2M at the end of a five-year investment horizon (this is the net sale proceeds). f. The investor gets a 14%,$4M,20-year mortgage with monthly payments. g. The cost recovery allowance recapture rate is 25%. h. The investor's ordinary income tax rate is 28%. i. The investor's capital gain tax rate is 15%. j. The appropriate discount rate for this investment (required return) is 18%. Calculate the relevant cash flows for this investment and apply the NPV and IRR rules to decide whether to pursue this project. Assumptions Acquisition Price Unit details DONT NEED YR 6 FOR YOUR PROJECT