The following information refers to a two-unit apartment building that is available for purchase.

Calculate the three-year cash flow projection by filling in the blanks below. Also calculate and fill-in the following ratios as indicated In table A (25 points)

Equity Dividend Rate

Debt Yield Ratio

Debt Coverage Ratio

Should the investor undertake the project? Evaluate/discuss the rational grounds for your judgment by computing (15 points)

NPV

IRR

Very briefly discuss your solutions below.

PROJECT DATA

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

Purchase Price: $84,000 ; Land Value = 25% of Property valueFinancing: LTV= 80%, Interest =6%, 15 years, monthly payments Holding period: 3 years (January 2009 through Dec. 2011) Selling price (End of yr.3)= $125000; selling expense : 3%Investors req. return= 16%; Operating Expenses = 50% of PGI Show your computation for:

PGI (year 1)..

PGI (year 2) ..

PGI (year 3) ..

The following information refers to a two-unit apartment building that is available for purchase. a. Caleulate the three-year cash flow projection by filling in the blanks below. Also calculate and fill in the following ratios as indicated In table A (25 points) Equity Dividend Rate I. Debt Yield Ratio Debt Coverage Ratio Should the investor undertake the project? Evaluate discuss the rational grounds for your judgment by computing (15 points) IL TRR Very briefly discuss your solutions below. PROJECT DATA Rent: $800 per unit/month rises at 40 per year; Vacancy - 100/ye Purchase Price: $84.000 Land Value = 258 of Property value Financing: LTV 808, Interest -68, 15 years, monthly payments Holding period: 3 years (January 2009 through Dec. 2011) Selling price (End of yr.3)- $125000; selling expense : 38 Investor's reg. return 168; Operating Expenses - 508 of PGI Show your computation for PGI (year 1) . PGI (year 2) - PGI (year 3) - Annual Debt Services #ia (32 points) TABLEA ahlow Protection Tears PRIVATE Potential Gross Income POT Vacancy/Collect VCL) tective Gross Income (EGE Operating Exp./ Capex Het Operating Before Tax Cash Zlov(ICT) Equity Total Cashflow Pres. Value LCEA pt Ted Ratio 1.2. Applicable - Pron table below Table Bi Reversion (Terminal Cash Flow Before Tax Table B: Reversion (Terminal Cash Flow Before Tax) PRIVATESales Price Selling Exp. ( 3 of Sales Price) let Sales Price Mortgage Balance (EOY 3) 1 Before Tax Eauity Reversion (BTER) Table C. Data for Computation of Evaluation Criteria in 6b One Two Three Year! ETCH PRIVATE BTER Total Cash Flows X PVE PV Total Cash Flow SPV [BTCF BTERA Equity Investmt NPV, IRRE 1B (10 points) Should the investor buy this property? What would be his Net Present Value to Equity and Internal Rate of Return to Equity Position? Discuss your computations below. Useful Computational Formula NPV. - - .. (1) tel [BTCP/(1+r)") + BTER: / (1+r)? - E Where t - 1,2,3 MB, - Terminal Mortgage Balance (MB) BTER - Before Tax Equity Reversion (Terminal Cash Flow) ADS - Annual Debt Service - MDS X 12 HDS - Monthly Debt Service E, Equity Investment NPV, -Net Present Value to Equity Position IRR - Internal Rate of Return to Equity Position