Therefore, I have selected this Threshold Rate: INSERT A NUMBER HERE 13.20%+2%= 15.20%

Using the Threshold Rate from above, compute the Net Present Value (NPV) for this Investment:

PROPOSAL 1175 GERARD AVENUE

Time Period (end of year)	CASH FLOW	COMMENT
0	($12,000,000)	PRESENT TIME INITIAL INVESTMENT IN THE APARTMENT TOWER (OUT-OF-POCKET = NEGATIVE CASH FLOW)
1	1,000,000	POSITIVE CASH FLOW (FROM RENTAL REVENUE OPERATING COSTS DEBT SERVICE)
2	1,400,000	POSITIVE CASH FLOW (FROM RENTAL REVENUE OPERATING COSTS DEBT SERVICE)
3	1,800,000	POSITIVE CASH FLOW (FROM RENTAL REVENUE OPERATING COSTS DEBT SERVICE)
4	2,100,000	POSITIVE CASH FLOW (FROM RENTAL REVENUE OPERATING COSTS DEBT SERVICE)
5	2,300,000	POSITIVE CASH FLOW (FROM RENTAL REVENUE OPERATING COSTS DEBT SERVICE)
6	2,400,000	POSITIVE CASH FLOW (FROM RENTAL REVENUE OPERATING COSTS DEBT SERVICE)
7	3,000,000	POSITIVE CASH FLOW (FROM RENTAL REVENUE OPERATING COSTS DEBT SERVICE)
8	16,000,000	THE PROJECT IS SOLD (AFTER NET INCOME, RENOVATION COSTS, CLOSING COSTS, & DEBT PAYOFF)

Using a threshold discount rate of INSERT A NUMBER HERE _______% for the Threshold Rate

INSERT NUMBERS HERE IN ALL THE BLANK SPACES

Time Period (end of year)	CASH FLOW	DISCOUNT FACTOR (@ Threshold Rate) from PRESENT VALUE TABLE	CALCULATED PRESENT VALUE FOR EACH YEAR
0	($12,000,000)	1.000
1	1,000,000
2	1,400,000
3	1,800,000
4	2,100,000
5	2,300,000
6	2,400,000
7	3,000,000
8	16,000,000
NPV =

INSERT NUMBERS HERE IN ALL THE BLANK SPACES

In conclusion, Project 1175 GERARD AVENUE has this standing in our Capital Budgeting system:

Initial Investment = ______________________

Its Time Line ends with a Sale of the property at the end of the _______ year.

At a Discount Rate of ______% it has a NPV = ______________.

This means that it MUST BE DESCRIBED AS AN ACCEPTABLE or UNACCEPTABLE PROJECT for the Threshold Rate of 14%.

The NPV value indicates that, after the _____ year, the project has earned an attractive rate of return of over _____% and still has some retained value.

Since our Capital Allocation Process applies an NPV standard, this project would be Accepted or Rejected. We would have to be careful about comparing it to other projects with similar NPV values, but it would certainly be earn a higher ranking than other projects with lower NPV values. Generally, we would accept all the other alternatives with higher NPVs because they would generally have higher IRRs too