Question
You are considering the purchase of an apartment complex. Purchase price: $775,000 BTCF: Year NOI 1 $103,085 2 $108,361 3 $113,875 4 $119,636 5 $125,651
You are considering the purchase of an apartment complex.
Purchase price: $775,000
BTCF:
| Year | NOI |
| 1 | $103,085 |
| 2 | $108,361 |
| 3 | $113,875 |
| 4 | $119,636 |
| 5 | $125,651 |
|
|
Holding period is four years
Cap rate is expected to be 7% in year 4
Selling expenses will be 5% of the sale price
The 4-year Treasury bill rate is 3% and your risk premium for this project is 8%
a) Calculate the NPV of this project assuming that you do not take any mortgages
b) You take a $620,000 mortgage. Your annual debt payment is $54,593. The outstanding loan balance at the end of year 4 is $596,558. Calculate the NPV of this project.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Meta Verse Complete Beginners Guide To Digital Asset
Authors: Koala Publishers ,Charles Murphy
1st Edition
979-8830770743
