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We decided that we want to: buy a , real estate, asset ( . . . we talked about an apartment ) of $ 1

We decided that we want to:
buy a, real estate, asset (...we talked about an apartment) of $1,000,000(1 mil)
hold that real estate asset for 10 years
sell that real estate asset in 10 years, and we expect to receive $1,800,000(...we did diligent market research....)
we could rent the real estate asset (i.e. apartment) for $36,000 annually in first year
the rent is increasing, in line with inflation, by 3% per year.
in year 5, we install some marble counters, which cost us $30,000
in year 7 we have to paint and renovate the apartment and that costs us $100,000
we decided, and discussed in class, that the discount rate we will use is 6%
Based on your analysis, is this a good deal? Why?
Support your response with (see slides):
Based on your analysis, is this a good deal? Why?
Support your response with (see slides):
payback analysis
IRR analysis and
NPV analysis
Try to use MS Excel functions (PV, FV, NPV, and IRR) in your spreadsheet.
For marks above 72%(Good) detail your opinion about the discount rate use (i.e. its logic, rationale etc.)
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