In each question below, carefully write out the NPV as a function of a general annual discount rate i. Calculate the final cash flow for each period (it must be one number not an expression). Write your answer on the first page. Commercial Real Estate Investment Bob buys a property that costs $1,000,000. Bob will own the property for two years. The NOI from the property for years 1-3 is to the right Bob will sell the property at the end of year 2 at a cap rate that is 250 basis points lower than the cap rate at which he bought the property Year NOI $100,000 $105,000 $110,000 2 3 26. Assume Bob does not use leverage. Write out the NPV of Bob's investment 27, Assume Bob finances his purchase with a 50% LTV Fixed Rate IO loan at an annual rate of 5% with annual compounding and annual payments, Write out the NPV of Bob's investment Commercial Mortgage Ann buys a property that costs $1,000,000. She finances the purchase with a 70% LTV mortgage. She gets a 20 year interest only fixed rate mortgage at an annual i terest rate of 5%, with annual compounding and annual payments Ann must pay 2 points upfront in mortgage closing costs (as a % of the loan amount). The loan has a 5/4/3/2/1 p epayment penalty structure (she must pay a 5% penalty if she prepays at any time in the first year, 4% penalty in the second year etc) Suppose An vill sel he property in 3 years,after her 3 year's mortgage payment and pay off the balance when she sells 28. Write out the NPV of Ann's mortgage In each question below, carefully write out the NPV as a function of a general annual discount rate i. Calculate the final cash flow for each period (it must be one number not an expression). Write your answer on the first page. Commercial Real Estate Investment Bob buys a property that costs $1,000,000. Bob will own the property for two years. The NOI from the property for years 1-3 is to the right Bob will sell the property at the end of year 2 at a cap rate that is 250 basis points lower than the cap rate at which he bought the property Year NOI $100,000 $105,000 $110,000 2 3 26. Assume Bob does not use leverage. Write out the NPV of Bob's investment 27, Assume Bob finances his purchase with a 50% LTV Fixed Rate IO loan at an annual rate of 5% with annual compounding and annual payments, Write out the NPV of Bob's investment Commercial Mortgage Ann buys a property that costs $1,000,000. She finances the purchase with a 70% LTV mortgage. She gets a 20 year interest only fixed rate mortgage at an annual i terest rate of 5%, with annual compounding and annual payments Ann must pay 2 points upfront in mortgage closing costs (as a % of the loan amount). The loan has a 5/4/3/2/1 p epayment penalty structure (she must pay a 5% penalty if she prepays at any time in the first year, 4% penalty in the second year etc) Suppose An vill sel he property in 3 years,after her 3 year's mortgage payment and pay off the balance when she sells 28. Write out the NPV of Ann's mortgage
