You are considering the purchase of an industrial building for $10,120,000 today. Below, you are given the information you need to analyze the investment and decide how to proceed.

Remember: Your submission for this assignment should be calculated in Microsoft Excel. Please show all your formulas in the spreadsheet. I can only give you partial credit if I see how you did each calculation.

Your expectations for this stabilized property include the following: first-year potential gross income of $4,250,000; vacancy and collection losses equal to 4% of potential gross income; operating expenses equal to 40% of effective gross income; and capital expenditures equal to 6.5% of EGI. You pay all of the operating expenses yourself, and you also have to pay a leasing broker 25% of vacancy and collection losses every year to fill the vacant spaces. The value of the building and the PGI both grow at 5% per year for the next six years. You sell the property after year 5. Your selling expenses are 2.75% of the resale price. Your discount rate is 7%.

1. Calculate the following for comparison to other similar properties:

(a) Going-in cap rate?

(b) Effective gross income multiple?

(c) Operating expense ratio?

(d) Going-out cap rate?

(e) Net income multiple?