Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Excel please! You are part of a small group of private equity investors considering purchasing a small apartment complex. Your job is to come up

Excel please! image text in transcribed
You are part of a small group of private equity investors considering purchasing a small apartment complex. Your job is to come up with a valuation in order to determine if your group should buy the building. Write a one-page memo providing your conclusions. Attach a printout of your Excel worksheetts) Facts about the complex: There are 40 units in the building, with an average vacancy rate of 10%. Rent per occupied unit is $24,000 per year. Variable cost per occupied unit is $10,000 per year. Annual fixed costs of maintenance and other expenses is $180,000. Assume we will receive these cash flows for 20 years, after which time the building collapses and we sell the land for $750,000. Assume that we are going to pay for the building now, but that abnual cash flows come at the end of the year. If we discount future cash flows at 10%, what is the apartment complex worth? If the apartment complex sells for $2,800,000, make a graph showing the combinations of vacancy rate and monthly rent-per-unit rate for which the complex breaks even (show for vacancy rates from 0.04 to 0.16 with intervals of 0.01) If the variable costs were actually fixed (and didn't depend whether the unit was occupied) would you expect bigger or smaller changes in the break-even-rent for a change in the vacancy rate? In general, do you think that vacancy rates and rents are positively or negatively correlated

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Management Of Business Finance

Authors: John Freear

1st Edition

0273014315, 978-0273014317

More Books

Students also viewed these Finance questions

Question

List six habits that can help you become a more positive thinker.

Answered: 1 week ago