You are considering the purchase of an apartment complex. The following assumptions are made: The purchase price is $1.200,000. Potential gross income (PGI) for the first year of operations is projected to be $190,000. PGI is expected to increase at 3 percent per year Vacancy is expected to be 5 percent of PGI. Operating expenses are estimated at 25 percent of effective gross income and capital expenditures are expected to be 5 percent of effective gross income. The market value of the investment is expected to increase 5 percent per year. Selling expenses will be 3 percent. The holding period is 3 years. The appropriate unlevered rate of return to discount projected Nols and the projected NSP is 10 percent. The required levered rate of return is 12 percent. 70 percent of the acquisition price will be borrowed with a 20-year, monthly-payment adjustable-rate mortgage. The margin is 3 percent. There are no caps. In the first year, the teaser rate is 5%. The index rate is 4% in year 2 and 3.5% in year 3. Financing costs will be equal to 2 percent of the loan amount at origination. you explain it? Calculate the net present value of this investment. Should you purchase? Why? What is the Debt Coverage Ratio? $$ # 1 ,