Suppose that you are contemplating an investment in an apartment building. Use the information provided below...

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Suppose that you are contemplating an investment in an apartmentbuilding. Use the information provided below to answer thequestions that follow: Type of Property: Apartment Building Numberof Units: 30 Average Rent: $1,500 per unit per month ExpectedGrowth in Rents: 5% per year Vacancy and Collection Losses: 5% ofPotential Gross Income Other Income: $50 per unit per monthExpected Growth in Other Income: 3% per year Operating Expenses:35% of Effective Gross Income Capital Expenditures: 4% of EffectiveGross Income Selling Expenses: 5% of Future Selling Price Going-OutCap Rate: 6.5% Expected Purchase Price: $5.25 million Loan Terms:Loan Amount: 85% of purchase price Interest Rate: 4.5% per yearwith monthly payments and monthly compounding Amortization Term: 30years a. What is the net present value of the before-tax unleveredcash flows if you assume a five-year holding period and a discountrate of 12%? b. What is the internal rate of return of thebefore-tax levered cash flows if you still assume a five-yearholding period?

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a 0 1 2 3 4 5 aPurchase price 5250000 bCAPEX412 21600 22680 23814 25005 26255 cGoingout valueYr5 Net income65 net of selling expenses4255706515 6219869 1Rental IncomePrev30150012105 540000 567000 595350 625118 656373 2Vacancy collection lossesAnnual rent5 27000 28350 29768 31256 32819 3Other incomePrev503012103 18000 18540 19096 19669 20259 4Operating Expenses3512 179550 188528 197954 See Answer

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Suppose that you are contemplating an investment in an apartmentbuilding. Use the information provided below to answer thequestions that follow: Type of Property: Apartment Building Numberof Units: 30 Average Rent: $1,500 per unit per month ExpectedGrowth in Rents: 5% per year Vacancy and Collection Losses: 5% ofPotential Gross Income Other Income: $50 per unit per monthExpected Growth in Other Income: 3% per year Operating Expenses:35% of Effective Gross Income Capital Expenditures: 4% of EffectiveGross Income Selling Expenses: 5% of Future Selling Price Going-OutCap Rate: 6.5% Expected Purchase Price: $5.25 million Loan Terms:Loan Amount: 85% of purchase price Interest Rate: 4.5% per yearwith monthly payments and monthly compounding Amortization Term: 30years a. What is the net present value of the before-tax unleveredcash flows if you assume a five-year holding period and a discountrate of 12%? b. What is the internal rate of return of thebefore-tax levered cash flows if you still assume a five-yearholding period?