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in excel if possible Assume that you are an investment analyst preparing an analysis of an investment pportunity for a client. Your client is considering

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Assume that you are an investment analyst preparing an analysis of an investment pportunity for a client. Your client is considering the acquisition of an apartment omplex from a developer at the point in time when the apartments are ready for first ccupancy. You have developed the following information. 1) Number of units =36 2) First year market rent per unit =$430 per month 3) Rent is projected to increase by 8% each year 4) Annual vacancy rate =3% of Potential Gross Income (PGI) 5) Annual collection loss =2% of PGI 6) Annual operating expense =35% of Effective Gross Income (EGI) 7) Miscellaneous yearly income (parking and washers/dryers) =$900 8) Monthly miscellaneous income is expected to remain constant 9) Purchase price =$2,000,000 10) Estimated value of land =$500,000 11) Anticipated mortgage terms: a) Loan to value ratio =.80 b) Interest rate =6% c) Years to maturity =30 d) Points charged =3 e) Prepayment penalty =2% of outstanding balance g) Fixed interest rate, monthly payments 12) Anticipated holding period =4 years 13) Proportion by which property is expected to appreciate during the holding period -- 5% a year 14) Estimated selling expenses as proportion of future sales price =5% 15) Marginal income tax rate for the client =24% 16) It is assumed that the property is put into service on January 1st and sold on December 31 st 17) Assume the client is "active" in the property management 18) It is assumed that the client has an adjusted gross income of $95,000 and has no other passive income not offset by other passive losses (for each year of the anticipated holding period) 19) Client's minimum required after tax rate of return on equity =11% 20) Client's capital gain tax rate =15% b. For the first year of operation the: (1) Overall (cap) rate of return (2) Equity dividend rate (3) Gross income multiplier (4) Debt coverage ratio

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