3. (7 points, 4+3) Consider the levered DCF model provided to you in tab A3 of the Excel spreadsheet a. Calculate the maximum price that an investor with the assumptions made in the model should be willing to pay for that property. Show this maximum price in cell C8. b. If you expect a general increase in the risk premium for real estate investments over the next 8 years, how would this affect the expected levered return on this property? Briefly Explain. Acquisition Price Expeded 1st Year NOI CAP Required Rate of Retum Expected NOI Growth Terminal NOI Growth Next Investor Reg Premium $9,500,000 $550.000 5.79% 8.00% 3.00% 2.50% 0,50% Down Payment Mortgage Rate Manutiry Levered Required Rate Minumum Required DCR $5,000,000 5.50% 20 11.00% 1.25 ominal CAP Next buyer Required retum Mortgage Payment (Annual 8.00 0.504 5376.657 Loan Amount DCR Miminum DGR satisfied? Marga Balance at Salo $4,500,000 1.40 Yad End of year NOI PV_NOI REV PV_REV 05 1 2 3 4 5 6 7 $550.000 $566,500 $583.495 5601,000 $619,030 $637,601 $656,729 $676,431 $500,250 $485,682 $463,197 $441,753 $421,301 $401,707 $383,195 $365,454 $11,555,690 Total Pv Total CF $9,500,000 $509,259 $550,000 $485,682 $566,500 $463,197 $583,495 $441,753 5601,000 $421,301 $619,030 $401,797 $637,601 5383,195 $656,729 58,608,634 $12,232,120 $376,557 $376,557 $376,552 $376,557 $376,557 $376,557 $376,557 $3,621,920 Leverked CF 55,000,000 5173,443 $189.943 $206,931 $224,443 $242,473 $261,044 $280.272 $8,610,200 PV(CF) $5,000,000 $156,255 $154,162 $151,311 5147.847 $143,896 $139,565 $134,947 $3,736,194 $6.243.180 Total PV: $9,714,810 NPV: $214,819 8.36% IRR NAV IRR: Amortization schedule: O 0 1 N 3 4 5 6 7 8 9 10 11 12 13 P Ending balance $4,500,000 $247,500 $129,057 $4,370,943 $240,402 $136,155 $4,234,788 $232,913 $143,644 $4,091,144 $225,013 $151,544 $3,939,600 $216,678 $159,879 $3,779,721 $207,885 $168,672 $3,611,049 $198,608 $177,949 $3,433,100 $188,820 $187,737 $3,245,363 $178,495 $198,062 $3,047,301 $167,602 $208,955 $2,838,346 $156,109 $220,448 $2,617,898 $143,984 $232,573 $2,385,325 $131,193 $245,364 $2,139,961 $117,698 $258,859 $1,881,102 $103,461 $273,096 $1,608,005 $88,440 $288,117 $1,319,889 $72,594 $303,963 $1,015,926 $55,876 $320,681 $695,245 $38,238 $338,319 $356,926 $19,631 $356,926 14 15 16 17 18 19 20 $0