Answer the following questions using the information provided below: 

What is cap rate on the purchase price?

Determine the sales price at the end of year 5

Based on your analysis, what do you think the initial value of the asset is?

If you buy the asset for $50 million, what is your NPV?  IRR?

Underwriting information:

300 unit apartment building 

1,500 per month average rent 

7% vacancy 

38% total operating expense ratio 

Replacement Reserves of $250 per unit per year 

3% growth rate 

Purchase price is $50 million 

Exit cap rate is 6.5% 

Sales costs are 2% 

Unlevered discount rate is 7% 

Assume 5 year holding period. 

Part 2 - Assume the above but now with the following loan information:

Loan principal of $30 million

5% interest rate

30 year term with amortization

2% loan fees

Calculate levered cash flows

Calculate net sales proceeds after debt repayment
What are net loan proceeds?
What is monthly loan payment?
What is effective annual interest rate (effective borrowing cost)?

What is your required equity investment if you buy the asset for $50 million?

What is your equity dividend rate?

What is the DSCR?

If the required return (discount rate) increases to 10%, what is your NPV?  Levered IRR?