The ideal project would identify an actual investment opportunity, provide support for the assumptions made, correctly calculate various performance measures, apply various risk assessment tools that are helpful to the decision maker (including Monte Carlo Simulation), and provide an appropriate recommendation given the results of your analysis and considering any non-quantifiable factors.

A satisfactory project would create a hypothetical investment opportunity, make up the necessary assumptions with little to no support, correctly calculate various performance measures, apply several risk assessment tools that are helpful to the decision maker, and provide an appropriate recommendation given the results of your analysis.

You are required to make a twenty-minute presentation of your analysis and to be prepared for clarifying questions. Your presentation should clearly describe the investment, the methods used to analyze this investment opportunity, the key assumptions used to estimate the incremental after-tax cash flows (including the expected investment horizon), the method and the estimate of the investments required return, the results and the implications of your analysis using both point estimates for the inputs and the various risk assessment tools, and provide a conclusion that should summarize the key findings and provide a balanced, well-supported, recommendation based on the quantitative analysis and a consideration of any non-quantifiable factors.

It is always better if you can directly estimate the required return of your investment but, if necessary, you can use Damodarans WACC by industry database.

I decided to invest in a complex building (4 residential and 4 commercial) total of 8 units which cost $3.6 million in Seattle. the renovation cost of 4 units of residential is $100,000.

Rent after renovation is $2,775 per unit/month. commercial rent is $2,286 per unit/month. the rent will increase by 10% per year. total taxes are $20,000 per year. total expense is $73,712 including total taxes. i have to find NPV,MIRR,IRR,and payback period. the key assumptions used to estimate the incremental after-tax cash flows (including the expected investment horizon). can a complex building be depreciable? the expected investment horizon is 10years. so as depreciate year is 10 years. depreciate evenly. please fill blank cell.

Assumptions

Purchase Price of complex building

$3,700,000

revenue (1)

Annual increase in Revenue (2-10)

Operating Margin

35%

Working Capita/Revenue

10%

Expected Tax Rate

25%

Required Return

10%

Time

Year

Year

Year

Year

Year

Year

Year

Year

Year

Year

Cash Flows

0

1

2

3

4

5

6

7

8

9

10

Purchase Price of complex building

$3,700,000

Increase in Revenues

increase in Operating Expenses

increase in Depreciation

Increase in Operating Profit

Increase in Taxes

Increase in After-tax oper.Profit

Increase in Depreciation

Change in Working Capital

Incremental After-Tax Cash Flows

Cummulative After-Tax Cash Flows

Performance Measures

NPV

IRR

MIRR

Payback