3

You are an experienced property analyst. Your client has identified an income producing property in the Laucala Beach Industrial precinct and would like to consult you on the viability of the investment. Below are details of the subject property:

Current Market Price

Net-lettable area (m2)

Acquisition-related cost (stamp duty, lawyers etc.) Potential Gross Income per square meter (m2) Vacancy

Operating Expense per square meter (m2)

Loan to Value Ratio (%)

Investment Loan Interest Rate/pa (fully amortizing) Loan Term (years)

Compounding/year

$ 7,000,000 4,500

$ 415,000 $ 150 8%

$ 25 60%

7.80% 20 12

Depreciation/pa

Investor's Marginal Tax Rate

Growth in PGI/pa

Growth in OPEX/pa

Expected After-Tax Disposition Cash Flow (end of Year 5)

$

$

156,000 45% 4.5% 3.50%

4,200,000

a) The client chooses to take an expected rate of return on equity of 13.00%pa. Complete the Multi Year Cash Flow and calculate the NPV and IRR