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.$)$