An apartment complex has 20 units. The monthly rental rent is $500 per unit in the first year. After the first year, rent is assumed to increase by 10% annually. The vacancy factor is 5% of potential gross income. Fixed operating expenses are $40,000 in the first year and are expected to grow by 10% annually after that. Variable expenses account for 40% of annual potential gross income. An investor expects to hold the apartment complex for 8 years, after which she expects to resell the property with a resale capitalization rate of 13% and incur a selling expense of 2% of the selling value. She estimates that 12% is a reasonable discount rate for the propertys annual income.

2.1. Show your table of cash flows and present values.

2.2. What is the total present value of the property?

2.3. What is the present value of the apartment if the vacancy factor is 10% of potential gross income?

2.4. What is the present value of the apartment if the variable expenses account for 30% of potential gross income?