You are an investor and have the opportunity to purchase a commercial building in a productive business environment.The asking price is $8,000,000 and you are able to secure financing in the form of a 20 year fully amortizing fixed payment mortgage for 75% of the asking price.This mortgage has monthly payments and monthly compounding periods with an annual interest rate of 8% with the entire balance due in 5 years or at the time of sale, whichever occurs sooner.

The building contains 180,000 square feet of leasable space and is situated on a 10 Acre lot.Rent in the area for comparable commercial space is $7.50 per square foot.Land prices in the area for lots in the 10 Acre range are $100,000 per acre.In addition, the following information and assumptions are available to aid your analysis:

Vacancy and Collection Loss (% of PGI) 8%

Year 1 Operating Expense Ratio (% of EGI)37%

Annual Inflation of Rents 3%

Annual Inflation of Expenses 3%

Commercial Depreciation Period39 years

Your Income Tax Rate38%

Your Capital Gains Tax Rate20%

Terminal Cap Rate(Applied to 5th year's NOI at sale)10%

Selling Expenses as a percent of Gross Sales Price 6%

Your After Tax Required Rate of Return14%

Planned Holding Period 4 years

1)Complete a Pro Forma Cash Flow Statement based on the information given (This is the excel part you will need to turn in.)

Should you invest in this property under the terms and assumptions outlined?

Why or why not?