Section $1$

A very wealthy client contacts you to discuss purchasing a potential investment property. He has already prepared a cash flow

model and has provided it to you for review. The property is stabilized, mbed use bulding with residential and commercial

tenants. The project is located in a very stable area with a solid list of tenants. Though the project was built within the last $5$

years, there are some signs of deferred maintenance and a need for $$100,000$ in capital expenditures right away. Commercial

leasing commissions are $6\mathrm{.}00\%$ and begin in Year $2.$ Leasing commissions are calculated based on the prior year's rent.

Your client intends on purchasing the property for $$70,000,000$ all cash and will sell it in Year $5.$ His Discount Rate is $8\mathrm{.}00\%.$ He

believes the project will generate a NPV of $$15,412,074$ and an IRR of $13\mathrm{.}60\%.$

After reviewing the model, what concerns $($if any$)$ do you have?

After making any necessary changes to the model, explain if your client should imvest or not.

Your client increases his bid to $$90,000,000.$ Should he invest? Why or why not?

Your client is determined to generate an $11\mathrm{.}00\%$ return. What is his maximum purchase price?