Ann is looking to buy an office building in 2014. She plans to rent it out for 5 years (2015-2019) and sell it at the end of 2019.

(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.