Problem 2 Apache's real estate department is considering buying a hangar and leasing it out to private jet operators. They ask you to calculate the NPV and IRR of the investment and have given you the data below. Assume that the hangar is sold in year 25 and that the mortgage runs 25 years. 5.0% Square footage 1,910 Property price ($) 1,015,000 Down payment 10.0% Interest rate 3.9% Closing costs at start 8,000 Broker fee in year 25 Yearly property 1.5% appreciation Rent/sq.ft./Inflator 3.00 Op. costs/yr. ($) /Inflator 11,640 Tax rate 21.0% Depreciation/year ($) 4,524 1.0% 1.0% AD AE 12 100 1 12 13 16 17 18 20 21 AC 25 22 Key Assumptions Square footage Property price ($) Down payment Interest rate Closing costs at start Broker fee in year 25 Property Value 10 Yearly appreciation 11 Mortgage Balance Net Properti Yalue 13 Operating Assumptions 14 Rentrsq.ft. / Inflator 15 Op. coststyr. ($) / Inflator 16 Tax rate 17 Depreciation/uear ($ Cash Flors Rent Income minus: Operating Costs 21 minus: Debt Amortization plus: Interest tax shield plus: Depreciation tax shield 24 minus: Initial Expenses 25 plus: Sale Property in year 25 Total Cash Flows IRR NPY @5% 27 30 Note: Tax Shields are the tax gains from expensing interest or depreciation. The general formula is interest expense x tax rate for interest tax shield A B C D E F G H I J K L M N O P Q R T U V W X Z AA S 18 Y 24 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 19 20 21 22 23 25 3 Beg. Balance 4 Payment 5 Interest 6 Principal 7 Ending Balance