D Case: Apartment Complex The apartment rental market has always been a good investment in Anchorage, A 50 apartment complex has recently been offered for sale. A friend, Sally, not extremely financially savy has asked you to help her answer some questions about the financial viablity of the this investment project. The particular cost estimates/information for this 5 year old structure are listed in the table below. Cost Amount Land Cost $1,000,000 Building Cost $2,500,000 Annual Upkeep $150,000 Property Taxes and 5% of the Total Investment Insurance Costs Useful Life, N 25 year MARR 1596 MV(25) 1,000,000 plus 10% of Initial Building Cost Exhibit 1: Basic Cost Information There are additional expenses that the friend expects to incur. At EOY 15 the apartment complex will need a roof replacement at a cost of $200,000. In addition, your friend thinks the common areas as well as drive areas should have periodic maintenance beginning at EOY 8 and every eight years thereafter for a cost of $50,000 each time. These costs are to be paid as part for the initial capital investment rather than borrowing the funds at their due date. Sally thinks that this apartment complex will be a good project for about 25 years. She expects a return (MARR) of 15% APY. As far as a market value at EOY 25, Sally thinks the land cost of 1,000,000 plus about 10% of the building cost will be recovered. This is a very conservative but realistic assumption The biggest question Sally has for you is about recovering the initial capital invested which she wishes to bundle as the initial building and land costs well as the future roof and common area expenses. The income stream for the apartment complex is only monthly rent money. How much should she charge for monthly rent in order to at least recover the bundled capital invested? (Breakeven) Your friend is a realist and wants to plan a base case based on an 85% occupancy rate. In order for Sally to acquire sufficient funding, she will need to persuade lending institutions the project is not only economically viable given a yet to be calculated monthly rent at an average