60.1K

Verified Solution

Link Copied!

Use the following property data:
Purchase price	$1,850,000
Cash flow from operations:
Year	1	2	3	4	5
NOI	$175,000	$200,000	$225,000	$250,000	$275,000
Debt Service	$140,000	$140,000	$140,000	$140,000	$140,000
Cash Flow at sale:
Sale Price:	$2,137,500
Cost of sale:	$64,125
Mortgage balance:	$1,603,125
Going in Cap Rate		8%
Required return, UNLEVERED CF's (APR)		10%
Required return, LEVERED CF's (APR)		15%

Compute a value for the property using direct capitalization and the first year's NOI: 2187500

Calculate the initial equity investment in this property, assuming UNLEVERED CF's (i.e. LTV = 0). Enter a positive number.,Find the UNLEVERED net sale proceeds from the sale of the property:,Calculate the UNLEVERED BTCF to equity in year 2. Don't overthink this,Calculate the UNLEVERED BTCF to equity in year 4. Don't overthink this...,Calculate the TOTAL UNLEVERED CF in Year 5.,Compute the NPV of the property based on UNLEVERED cash flows. Round to the nearest dollar.,Calculate the IRR of the property, based on UNLEVERED CF's. Express your answer in percent. Round to TWO decimal places.

Answer & Explanation Solved by verified expert

See Answer