You are considering the purchase of a small apartment complex.

The following assumptions are made:

• The purchase price is $1 million.
• Potential gross income (PGI) for the first year of operations is projected to be $171,000.
• PGI is expected to increase 4 percent per year.
• No vacancies are expected.
• Operating expenses are estimated at 35 percent of effective gross income. Ignore capital expenditures.
• The market value of the investment is expected to increase to $1,169,859 at the end of 4 years.
• Selling expenses will be 4 percent.
• The holding period is four years.
• The appropriate unlevered rate of return to discount projected NOIs and the projected NSP is 12 percent.
• The required levered rate of return is 14 percent.
• 70 percent of the acquisition price can be borrowed with a 30-year, monthly payment mortgage.
• The annual interest rate on the mortgage will be 8 percent.
• Financing costs will equal 2 percent of the loan amount.
• There are no prepayment penalties.

Required:

Calculate net operating income (NOI) for each of the four years.

Note: Enter your answers in dollars, rather than in millions of dollars. Do not round intermediate calculations and round your final answer to nearest whole dollar amount.

Calculate the net sale proceeds from the sale of the property.

Note: Enter your answers in dollars, rather than in millions of dollars. Do not round intermediate calculations and round your final answer to nearest whole dollar amount.

Calculate the net present value of this investment, assuming no mortgage debt. Should you purchase?

Note: Enter your answers in dollars, rather than in millions of dollars. Do not round intermediate calculations and round your final answer to nearest whole dollar amount.

Calculate the unlevered internal rate of return of this investment, assuming no debt. Should you purchase?

Note: Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (i.e. 0.1234 should be entered as 12.34).

Calculate the monthly mortgage payment. What is the total per year?

Note: Enter your answers in dollars, rather than in millions of dollars. Do not round intermediate calculations. Round your monthly payment answer to two decimal places and the annual payment answer to nearest whole dollar amount.

Calculate the loan balance at the end of years 1, 2, 3, and 4. (Note: The unpaid mortgage balance at any time is equal to the present value of the remaining payments, discounted at the contract rate of interest.)

Note: Enter your answers in dollars, rather than in millions of dollars. Do not round intermediate calculations and round your final answer to nearest whole dollar amount.

Calculate the amount of principal reduction achieved during each of the four years.

Note: Enter your answers in dollars, rather than in millions of dollars. Do not round intermediate calculations and round your final answer to nearest whole dollar amount.

Calculate the total interest paid during each of the four years. (Remember: Debt Service = Principal + Interest.)

Note: Enter your answers in dollars, rather than in millions of dollars. Do not round intermediate calculations and round your final answer to nearest whole dollar amount.

Calculate the (levered) required initial equity investment.

Note: Enter your answers in dollars, rather than in millions of dollars. Round your "Loan amount" answer to 2 decimal places.

Calculate the before-tax cash flow (BTCF) for each of the four years.

Note: Do not round intermediate calculations and round your final answer to nearest whole dollar amount.

Calculate the before-tax equity reversion (BTER) from the sale of the property.

Note: Do not round intermediate calculations and round your final answer to nearest whole dollar amount.

Calculate the (levered) net present value of this investment. Should you purchase?

Note: Do not round intermediate calculations and round your final answer to nearest whole dollar amount.

Calculate the (levered) internal rate of return of this investment. Should you purchase?

Note: Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (i.e. 0.1234 should be entered as 12.34).

Calculate, for the first year of operations, the

(1) Overall (cap) rate of return.

(2) Cash-on-cash return.

(3) Effective gross income multiplier.

(4) Debt coverage ratio.

Note: Do not round intermediate calculations. Round your final answers to two decimal places.