1. Nimish has provided some quick, rough projections of expected rental revenues through Year 10, if the company decides to hold onto the building and let the units out for rent. Nimishs assumptions are shown in blue on the accompanying spreadsheet.
   1. Calculate the cash flows on the property for each year.

Year 1

2. Calculate the PV of the property cash flows for each year.
3. Assume that the total development costs for the building are the same as your answer to question 3. What is the present value of all potential before-tax cash flows through Year 5? With those revenues in mind, what is the minimum price at which you would have to sell the building in Year 5 to generate an NPV greater than zero?
4. What is the minimum price at which you would have to sell the building in Year 10 to generate an NPV greater than zero?

Question 3 Maximum Total Development Costs: Question 4 Determine appropriate values for each assumption, then use those values to build a rough estimate of expected returns through Year 10. 4.a. Nimish's Assumptions: \begin{tabular}{|l|r|} \hline Initial Average Rent Per Unit: & $2,000 \\ Total Number of Units: & 75 \\ Annual Rental Growth: & 3.00% \\ Average Vacancy Rate; & 5.00%% \\ OpEx as Percentage of PGI: & 35.00% \\ CapEx as Percentage of NOI: & 10.00% \\ \hline \end{tabular} 4.b. PV of Net Cash flow 4.c. \begin{tabular}{|l|l|} \hline PV of Net Cash Flow Through Year 5 & \\ Required Sale Price of Building: & \\ \hline \end{tabular} 4.d. \begin{tabular}{|l|l|} \hline PV of Net Cash Flow Through Year 10: & \\ Required Sale Price of Building: & \\ \hline \end{tabular} Question 5 Question 3 Maximum Total Development Costs: Question 4 Determine appropriate values for each assumption, then use those values to build a rough estimate of expected returns through Year 10. 4.a. Nimish's Assumptions: \begin{tabular}{|l|r|} \hline Initial Average Rent Per Unit: & $2,000 \\ Total Number of Units: & 75 \\ Annual Rental Growth: & 3.00% \\ Average Vacancy Rate; & 5.00%% \\ OpEx as Percentage of PGI: & 35.00% \\ CapEx as Percentage of NOI: & 10.00% \\ \hline \end{tabular} 4.b. PV of Net Cash flow 4.c. \begin{tabular}{|l|l|} \hline PV of Net Cash Flow Through Year 5 & \\ Required Sale Price of Building: & \\ \hline \end{tabular} 4.d. \begin{tabular}{|l|l|} \hline PV of Net Cash Flow Through Year 10: & \\ Required Sale Price of Building: & \\ \hline \end{tabular} Question 5