n investor has been offered a block of thirty (30) flats which has just been completed with an offer price of $6.0 million ($.80 million for land and $5.2 million for building). The local estate agent advises that the investor can expect to have the flats rented at $2500/month/flat, with an average occupancy rate of 90%. The investor wants at least 10% per annum on this investment. The life of the building is 25 years and the investment has a salvage value of $20.0 million. The investor will need to borrow $1.5 million to purchase the building and land. The interest rate of the loan is 9.0% per annum. The loan is to be paid off over 25 years. The outgoings are as follows: Caretaker: $3000/month and increasing 2% per annum Heating oil: $1500/year and increasing 2% per annum Water: $6500/year and increasing 2% per annum Agent commission: 1.5% of initial gross rental revenue and increasing 2% per annum Insurance: 1.0% of first cost of building and increasing 2% per annum Maintenance: One-month rental on each flat/year and increasing 2.5% per annum Other costs: 1% of first cost of building and increasing 1.5% per annum (a) Develop a 25-year cash flow by showing the various cost components associated with this investment? (b) Should the investor buy the flats: i. Based on IRR ii. Based on the NPV? (c) Carryout a sensitivity analysis and plot a Spider Chart using the following: i. Rental income varies from $2000 to $4000 per month/flat ii. Borrowed (Loan) interest rate varies from 6% to 11% per year iii. Salvage value varies between $20.0 million to $26.0 million (d) Discuss your results. (e) Is the investment viable? Explain. (f) If the investment is not viable then what suggestions would you recommend to make it a viable investment ?