Suppose that you are considering an investment in an apartment building. The specifics are: - The building is four years old, has a 85 percent occupancy rate, and has an expected useful life of 25 years. Assume that this occupancy rate is expected to continue for the life of the building. - There are 130 2-bedroom units, 100 1-bedroom units, and 70 studios. - The 2-bedroom units rent for $2800 per month, the 1-bedroom units for $2000 per month, and the studios for $1200 per month. - Current rent control laws will prevent the rents from ever being raised. - The estimated annual maintenance cost for the building is $1500000 per year (this is independent of the number of apartments rented). - There is an additional estimated maintenance cost at $200 per unit per month, when each unit is rented. - There will be no salvage value to the building in 25 years, but it is estimated that it will cost 6 million dollars at that time to demolish the building as will be required in the purchase contract. (You are not purchasing the land. You will have a 25-year lease of the land, which is paid for in the purchase of the building.) - The asking price of the building is $30 million. - The tax-rate is 30%, and assume the building will be fully depreciated over its useful life. - The WACC is 9%. Develop the pro-forma income statement, compute the Operating Cash-Flows and NPV. What is the OCF breakeven for the project (roundup nearest unit)?

a. 231 units; 77% occupancy

b. 261 units; 87% occupancy

c. 141 units; 47% occupancy

d. 201 units; 67% occupancy

e. 171 units; 57% occupancy

002