You found your previous analysis informative but insufficient to make a final decision. You want to project further into the future to make sure the investment is valuable over the long run. Start with the NOI that you calculated in Part One of the Case Study. You do not need to recalculate NOI, but you will need to calculate BTCF for each year. You also need to remember the initial value of the building and your equity investment.

1. Scenario One: The value of the building and the NOI both grows at 10% per year for the next five years. You sell the property after year 5, and you pay off the remaining balance of the loan, $1,350,339.

(a) What is the NPV of your investment?

(b) What is the IRR of your investment?

2. Scenario Two: A recession hits in year 2. The value of the building and the NOI decline in value by 10%. They rebound in year 3, growing by 15%. In years 4 and 5, they return to their previous growth rate of 10% per year. Again, you sell the property after year 5, and you pay off the remaining balance of the loan, $1,350,339.

(a) Now what is the NPV?

(b) And what is the IRR?

3. Scenario Three: Your firm has difficulty weathering the recession. Theyre running low on cash. They tell you that you have to sell the property after year 3 and you pay off the remaining balance of the loan, $1,408,236.

(a) What is the NPV this time?

(b) What is the IRR?

4. How do these projections affect your initial decision regarding whether to invest in the property? How do they change the conclusions you reached in Part One from calculating the one-year ratios?