Please answer all the following questions. Thanks!

will use the assumptions as explained below. In this scenario, the acquisition price of a hotel in NYC is $600,000,000. The LTV is 70%. The cost to acquire the property is 5% of the loan amount. The investor will sell the property after 5 years. The loan on the property is a 5/1 ARM amortized over 30 years with an interest rate of 5%. Escrows are 1% of the acquisition price. Potential Gross Income is projected to be 15% of the acquisition price and is projected to increase 2% per year every year. Vacancy is projected to be 25% of PGI every year with no change over 5 years. Operating Expenses are projected to be 32% of EGI with no change over 5 years. Capital Expenditures are projected to be 12% of EGI with no change over 5 years. The cost to sell the property in year 5 is 6% of the future sales price. The company acquiring the hotel has a WACC/hurdle rate of 12%. The company has projected that the going out Cap Rate will be 4.96. The firm is looking for an IRR of 15% or higher

1. What is the Going In Cap Rate using the acquisition price? 6.30% 5.74% 7.6% 7.2%

2.

What is the loan balance after 5 years assuming the loan has been paid down at a regular pace? 346,550,087 385,680,674 339,929,147 342,398,439

3. What is the projected future sales price in year 5? $653,754,884 $729,227,562 $759,831,712 $841,416,419

4. What is the Before Tax Equity Reversion assuming the loan has been paid down at a regular pace over 5 years? $405,250,759 $343,546,889 $288,056,288 $358,844,331

5. What is the NPV for the equity investor based on BTCF and BTER? +$26,342,482. Good investment for the firm -$13,769,892. Bad investment for the firm +$39,771,073. Good investment for the firm -$26,851,908. Good investment for the firm

6. What is the IRR for the 5-year hold? MAKE SURE YOU ARE USING the initial investment, BTCF and BTER. 11.6% 17.4% 25.7% 20.4%

7. Does the investment have favorable leverage? No, because the NPV on the building is negative. Yes, because the IRR on the building is bigger than the WACC. Yes, because the NPV is positive. Yes, because the IRR for the Equity Investor is bigger than the Mortgage Interest Rate.

8. Should the investor purchase this building? Yes, because the NPV for the equity investor is negative No, because the CAP rate is less than the IRR. Yes, because the IRR on the building is higher than their requirement and the NPV is positive. Yes, because the IRR is greater than the mortgage interest rate.

9. What is the Debt Yield Ratio and is it favorable to the lender? 7.8% No 11.6% No 11.0% Yes 9.4% No

10. What is the ratio used to determine how many years is will take for the first year NOI to equal the acquisition price? Equity Dividend rate, 3.17 EGI Multiplier, 1.48 NIM, 15.3 Debt Yield Ratio, 7.8

11. What would the appraisers valuation of the building be if they used the 1st year projected NOI we have come up with in this scenario and a CAP rate comprised of 5 comps where comp 1 = 5.6%, comp 2 = 5.8%, comp 3 = 5.9%, comp 4 = 6.2% and comp 5 = 5.1%? $675,088,655 $660,860,655 $687,537,062 $582,487,996

12. If the loan was a 3/1 ARM, what rate would the loan adjust to in years 4 and 5 if the ARM had a margin of 2% and was tied to the COFI index and the index rate in year 4 was 6% and 9% in year 5 with CAPS of 2/2/5? 7% and 9% 5% and 9% 6% and 8% 8% and 11%

13. What would the after-tax IRR be in this scenario if the companys tax rate was expected to be 25%? 13.4% 14.2% 15.4% 10.58%