Suppose that you are considering an investment in an apartment building. Use the information provided...
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Suppose that you are considering an investment in an apartment building. Use the information provided below to answer the questions that follow: $1,500 per Type of Property: Number of Units: Average Rent (Year 1): Annual Growth in Average Rent: Vacancy and Collection Losses: Other Income (Year 1): Annual Growth in Other Income: Operating Expenses: Capital Expenditures: Selling Expenses: Going-Out Cap Rate: Apartment building 30 unit per month 5% 5% of Potential Gross Income unit 3% 35% of Effective Gross Income 4% of Effective Gross Income 5% of Future Selling Price 6.5% $50 per per month Expected Purchase Price: $5.25 million Loan Terms: Loan Amount: Interest Rate: 85% of Purchase Price 4.5% per year with monthly payments and monthly compounding Amortization Term: 30 years a. What is the net present value of the before-tax unlevered cash flows if you assume a five-year holding period and a discount rate of 12%? b. What is the internal rate of return of the before-tax levered cash flows if you still assume a five-year holding period
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