Your client has been offered the opportunity to purchase a property investment. Given the following assumptions:

Holding period 5 years

Cost $50,000,000

Rental income $4,000,000(receivable annually in arrears and linked to inflation)

Inflation forecast 3%

Exit yield forecast 6%

Target rate of return 10%

Transaction costs 3%

i. Advise your client of the Net Present Value of the investment opportunity.

ii. Annotate your calculations with an appropriate commentary.