The Four Tests to Measure Investment Returns

You are a property manager for a property owned by a group of investors. Your clients have been approached by real estate professionals who want to sell three different properties. Your clients' desired rate of return is $9\mathrm{.}6\%$ on real estate investments. The following propositions have been made:

$5.$ Proposition $1$:

Current asking price $($initial investment$)$: $$14,300,000$

Cash flows:

Year $1$: $$910,000$

Year $2$: $$920,000$

Year $3$: $$950,500$

Year $4$: $$965,000$

Year $5$: $$995,700$

Net sales proceeds at the end of Year $5$ are estimated to be $$16,000,000.$ What is the net present value $($NPV$)$ of this asset? What is the internal rate of return? How does the IRR compare to the owner's required return? Would you advise your client to purchase the asset or pass? Why or why not? To show your work, copy your FAST Standalone DCF spreadsheet as a picture, then past the picture here. Please resize it so that it fits neatly and compactly on the page. $(5$ points$)$

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