What is the before-tax equity yield (internal rate of return [IRR]) for Plaza

Suites based on the following assumptions?

Purchase price: $1,000,000

Acquisition costs: $50,000

Year one potential rental income: $145,000

Potential rental income annual growth rate: 3 percent

Annual vacancy and credit loss projection for the next six years: 8 percent

Year one operating expenses: $45,000

Operating expenses annual growth rate: 3 percent

Projected end of year five sale price: Capitalize year six NOI at 8.5 percent

(Rounded to the nearest $1,000.)

End of year five cost of sale: 4 percent of sale price

Anticipated holding period: Five years

The following additional assumptions are needed for the "With

Financing/Before Tax" analysis:

Maximum loan-to-value (LTV) ratio: 75 percent

Minimum debt-service coverage ratio (DSCR): 1.2

(Calculate the maximum loan amount using LTV ratio and DSCR, and use

the lesser of the two amounts rounded down to the nearest $1,000 as the

loan amount for the analysis.)

Interest rate: 8.5 percent

Amortization period: 20 years

Loan term: 10 years

Payments per year: 12

Loan costs: 2 percent of loan amount

Before determining the before-tax equity yield, it's necessary to find the loan

amount available. Available loan amounts can be calculated using the LTV

ratio or DSCR.

Use an Excel spreadsheet and show work