You are evaluating a project that consists of investing in a commercial property. The property has a value of $5,000,000 and you take a loan with fixed monthly payments at the end of the period (overdue), 10% annual nominal interest rate with monthly capitalization, with a 15-year term. You put down a 35% down payment. The property will be put up for lease after being acquired. You estimate that the monthly payments to be received for the lease will be in perpetuity and will grow monthly at a nominal annual rate with monthly capitalization of 9%. The first payment to be received for the lease corresponds to 50% of the monthly installment of the credit. The installment and lease payment dates coincide, in particular, the first lease payment will be received on the same date as the first credit installment.

Assume that these are the only flows relevant to evaluating the project. All project flows will be discounted at a nominal annual rate with monthly compounding of 12%.

a) Calculate the monthly installment of the credit .

• $34,924.67

• $35,981.93

• $37,611.18

• $40,297.69

• $42,984.20

b)Calculate the NPV (Net Present Value) of this investment.

• $2,324,951.95

• $2,888,409.80

• $3,451,867.64

• $3,926,032.27

• $4,015,325.48

c) At the end of year 10, the estimate of the monthly growth of the rental payment rises to 11% annual nominal with monthly capitalization in perpetuity. This means that the lease payment in month 121 will grow from the payment in month 120 at the new rate, as will all future payments. Assume that the increase in monthly rental payments over the initial estimate is used to increase the monthly loan payment starting in month 121. How much faster will the loan be paid off?

• 3 months

• 4 months

• 5 months

• 6 months

• 7 months