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How do I use Excel functions (including the FV function) to determine the total financing cost, net profit, and profit margin, given the following scenario:

How do I use Excel functions (including the FV function) to determine the total financing cost, net profit, and profit margin, given the following scenario:

Apartment (Test Case):

  • This apartment is being sold for $225k and requires a 20% upfront deposit. There is also an additional upfront $2,500 closing fee that will need to be covered on top of the purchase price. Your investment team is willing to cover the upfront expenses using its own cash.
  • For the remainder of the property purchase price, a private loan provider will be used. The loan provider is willing to offer a rate of 12.5% annual interest on a loan for the remaining sum on a monthly accrual. During the loan period, your company is willing to pay $10k per month towards its loan. The company believes it can complete renovations within 5 months of purchase.
  • The company will pay for renovations out of pocket using its own cash. It expects to spend $15k on materials and supplies and another $25k in labor.
  • Your team believes the property can be resold for $363k after renovations.

  • As this is the test case, your team has offered you the following values to help calibrate your model. Based on the information provided, the above deal should net a total profit of $86,980.22 with a profit margin of 24% (give or take a few hundred dollars).

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