The following info refers to a two-unit apartments building that is available for purchase.

a) Calculate the tree-year cash flow projection by filling in the blanks below. Also calculate and fill-in the following ratios as indicated in Table A.

i) Equity Dividend rate

ii) Debt yield ratio

iii) Debt coverage ratio

Project Data:

Rent: $800 per unit/month; rises at 4% per year; Vacancy= 10%/yr

Purchase price: $84,000; land value= 25% of property value

Financing: LTV=80%, interest= 6%, 15 years, monthly payments

Holding period: 3 years (Jan 2009 through Dec 2011)

Selling price (End of yr.3)= $125000; selling expense: 3%

Investor's req. return= 16%; operationg expenses= 50% of PGI

show computaion for: PGI for all 3 years, annual debt service

Table A
Year	1	2	3
Potential Gross Income
Vacancy
Effective Gross Income
Operating expenses/ CapEx.
Net operating income
Annual debt service
Before tax cash flow
Before tax equity reversion **	n.a	n.a
Total Cash flow year (1,2,3)
X PVF16%,t
Pres. Value (CFt)
Equity dividend rate
Debt coverage ratio
Debt yield ratio

n.a= not applicable; ** from table B below

Table B

Sales price
- Selling exp. (@3% of sales price)
Net Sales price
- Mortgage Balance (EOY 3) {Please show calculation}
Before tax equity reversion

b) Should the investor buy this property? What would be his NPV to equity and IRR to equity position? Discuss your computations below.

Year	1	2	3
BTCFt
BTER3	----	----
Total cash flows
X PVF16%, t
PV [Total Cash Flow]
?PV [BTCFt, BTER3]		n.a	n.a
Equity Investment		n.a	n.a
NPVE		n.a	n.a
IRRE		n.a	n.a

Please try to show calculations as much as you can.