You are considering the purchase of an apartment complex today. The following assumptions are made: The purchase price is $10,000,000 . You expect to sell the property five years from today. Net operation income (NOI) for the first year is projected to be $500,000 and is expected to increase by 3 % per year. The market value of the investment is expected to increase by 3 % per year. Selling expenses will be 3 % of the expected selling price. Your required levered rate of return (return on equity) is 10% 60 percent of the purchase price can be borrowed with an interest-only fixed rate mortgage. The mortgage interest rate is 4 % Up-front financing costs will equal 2 % of the loan amount. (2 p) a) Calculate the levered net present value (NPV) of this investment b) Should you purchase the apartment complex according to the NPV-rule? Why? (2 p) c) Is the levered IRR higher or lower than 10 %? Why? d) Suppose the lender requires the debt coverage ratio (DCR) to be at least 1.3 each (2 p) year. Given the cash flow assumptions above, can you meet the lender's DCR requirement each year (year 1-5)? Why? (2 p) (2 p) e) What is the going-in cap rate (capitalization rate)