Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Show excel Steps for the highlighted sections Excel steps Fill in the sheet titled NPV - IRR . Ann will buy the property in 2

Show excel Steps for the highlighted sections Excel steps
Fill in the sheet titled NPV-IRR.
Ann will buy the property in 2014, she will collect NOI for 5 years 2015-2019, and she will sell it in 2019.
Anns loan has a 5/4/3/2/1 prepayment penalty structure, so if she prepays in the first year, she will pay
a penalty equal to 5% of the balance, in the second year she will pay a penalty equal to 4% of the
balance etc.
Ann forecasts NOI will grow at 2% per year, compounded annually.
Ann forecasts she can sell the property in 2019 at a 6.25% cap rate.
Recall: Sale price in 2019= NOI2020/CAP RATE 2019
(3.a) How much will Ann sell the property for in 2019?
(3.b) How much of a capital gain will Ann earn? (Hint: capital gain = sale price purchase price)
(3.c) What is Anns IRR for this investment?
(3.d) If Anns discount rate is 25%, what is her NPV? Should she make this investment?
(3.e) Plot Anns NPV for discount rates 0%-100%. Copy and paste the chart below.
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Money Banking And Financial Markets

Authors: Stephen Cecchetti, Kermit Schoenholtz

3rd Edition

007337590X, 9780073375908

More Books

Students also viewed these Finance questions

Question

I didnt know who to talk to.

Answered: 1 week ago

Question

Th e complaint department was closed over the lunch hour.

Answered: 1 week ago

Question

Th ey probably would have treated me like a criminal.

Answered: 1 week ago