Assume you are considering a proposal to buy an old house in the Netherlands to convert into 5 luxury rental apartments and hold it as an investment so that you create regular income for the next5 years. The estimated cost of the house and the renovations would be about 400,000.

1. Capital structure & cost of capital analysis: estimate the overall rate of return (WACC). Make assumptions about your capital structure mix. How are you going to finance the investment? Determine which financing sources youll use and discuss how the capitalstructure mix affects the WACC. Present your calculations and discuss the findings.

2. Capital budgeting analysis: Discuss which methods of Investment appraisals (at least 2) you will use to evaluate your project

3. Shareholder value analysis: Assume that after 5 years, you want to sell the property. Howwill you measure your companys commitment to value? Which method will you use andwhy? What would be the minimum price or rate of return youll accept? Present your calculations and discuss the findings.

4. Risk analysis: every investment is exposed to significant risks. Name and discuss the risks (at least 2 risks) associated with this specific investment and your strategy towards these risks.

5. Do not consider taxation in your calculations. Assume banks charge 3% interest on borrowings Make assumptions and/or research for the main elements you want to include in your calculations e.g. your own expected return on equity, rent prices, monthly costs, risk factors, growth rates etc.