You are considering the purchase of an apartment complex. The following assumptions are made: The purchase price is $1,000,000. Potential gross income (PGI) for the first year of operations is projected to be $171,000. PGl is expected to increase at 4 percent per year. No vacascies are expected. Operating expenses are estinated at 35 percent of effective gross income. Igpore captal expenditures. The maket vabse of the investment is expected to jacrease 4 percent per year: Selling expenses will be 4 percent. The bolding period is 4 years. The appropsiate unlevered rate of return to discount projected NOIs and the projected NSP is 12 percent. The recured levered rate of return is 14 percent. 10 percent of the acquistion price can be borrowed with a 30 -year, monthly paymeat mortpage. The anmal interest tate on the mortgage will be 8.0 percent. Financing costs wil equal 2 percent of the loan amount. There are no prepayment penalties: a Calculste net operating income (NOD) for each of the four years. 18 b Calculve the net sale proceeds from the sale of the property. 19 c. Calculate the net present value of this investruent, assming no mortgape debt Sbould you parchatie? Why? 20 o Calculate the internal rate of return of this iuvestment, assuming no debt. Shoild you parchase? ? 1000000 171000 0.04 0 21 e Cakctate the moelthy mottgage payment What is the total per year? 22 ( Calcalate the foan balance at the end of years 1,2,3, and 4. 23 g. Calculate the amount of principal rectaction acticved daing each of the four years 24 h Calculate the toed intereit paid during each of the fout years. 25. 1 Calculate tho kvered required initial ecuity investmest. Calculate the before tax cash flow (BTCF) for each of the fout years Cakculat the before tex eqaity reverion (BTER) from the sale of the property Caculate the Keved set preient valoo of this investusent. Should you parchase? Why? in Calcilate tho intenal rate of retarn of this enestriees with debe Should yos purchave? 7