Evaluate the purchase of an existing 500 unit apartment complex for $20000000, the building is assumed to have a 20 year functional life. Treat the rents as being collected at the end of each year, along with associated variable and fixed costs. Assume rent controls will prohibit the rent from being raised over the life of the building. Assume that the underlying property reverts to the original owners at the end of twenty years, and that you will also be responsible for demolition and clean-up costs, to be incurred at the end of the buildings life. Rentals are estimated at 450 units per year. Each unit will be rented for a cumulative monthly amount of $20000 per year. Cost per unit when rented $8000 per year. Fixed costs $3000000 per year for the building, other than the initial investment. Demolition/Clean up $4500000 after-tax. Depreciation is to be straight-line. Assume the project can be financed at 8% (before-tax) using debt. Tax Rate is 21%. Develop a pro forma income statement and compute the after-tax operating cash-flow (OCF). Having studied market downturns, you estimate that a worst case scenario would entail rental of about 70% of the apartments at 75% of the normal rent. Also estimate a maximum value for the project assuming the building can maintain a rental rate of 95%, at a 15% premium over the currently planned rent. Assume before tax required return at 8%. What is the NPV of the worst case scenario?

Group of answer choices

-$22900000 to -$21900000

-$21900000 to -$20900000

-$23900000 to -$22900000

>-$20900000

<-$23900000