1. An investor is planning to purchase a new apartment property for $1.5 million. He can obtain an 80% loan for 30 years at 10%. NOI is expected to be $500,000 in the first year and grow at a rate of 2% for the next three years along with the underlying value of the building. The building and improvements represent 80% of value and are depreciated over a 27.5 useful life for an annual depreciation allowance of $43,636. The project is expected to sell after three years, and the investors are subject to a 30% tax rate. Create pro forma cash flow statements to solve the following problems.
   1. Find the BTIRR and ATIRR.
   2. Find the unlevered BTIRR and ATIRR
   3. Computer the Break-even interest rate (BEIR).
   4. Using the pro forma cash flow statement for the leveraged property, find the marginal rate of return from years 2 to 3.

Consider the pro forma cash flow statement created in part A of problem 1. You could pay $30,000 today for a renovation that would cause the NOI and overall value to increase by 3% annually rather than 2%. If an equivalent risk investment earns a 12% rate of return, should you renovate the property?