$(30$ points$)$ A real estate developer who specializes in residential apartments. A complex of $20$

run$-$down apartments has recently come on the market for $$332,500.$ The real estate developer

predicts that after remodeling, the $12$ one$-$bedroom units will rent for $$385$ per month and the

$8$ two$-$bedroom apartments for $$450.$ He budgets $18\%$ of the rental fees for repairs and

maintenance. It should be $30$ years before the apartments need remolding again, if the work is

done well, Remodeling costs are $$15,000$ per apartment. Both purchase price and remodeling

costs qualify as $27\mathrm{.}5-$year MACRS property.

Assume that the MACRS schedule assigns an equal amount of depreciation to each of the first

$27$ years and one$-$half year.

The developer does not believe he will keep the apartment complex for its entire $30-$year life.

Most likely he will sell it just after the end of the tenth year. His predicted sale price is

$$980,000.$

The developer's after$-$tax required rate of return is $10\%,$ and his tax rate is $35\%.$

Should the developer buy the apartment complex? What is the after$-$tax NPV$?$ Ignore tax

complications, such as capital gains.

$($Show your work for investment amount, present value of cash inflows from operation,

present value of tax savings, present value of cash effects of disposal, and total net present

value.$)$