Appendix A - Scenario Information You are required to value a new business, West Pentire Apartments Ltd, which involves the acquisition of a new complex of residential apartments to let. You must forecast the annual financial statements over a 6-year horizon, and perform a discounted cash flow valuation of the business. Further information about the business is provided below. Non-Current Assets: - Land and improvements: 6,820,000 - Buildings and improvements: 11,100,000 - Furnishings and equipment: 214,000 - Furnishing and Equipment has a useful life 6 years - Furnishing and equipment has no residual values - The straight-line depreciation method is used Equity and Long-Term Debt: - Long-term loan: 7,500,000 - Number of years: 25 years (repaid in equal installments) - Interest rate: 6.0% per annum - Equity (capital contributed by the owners): 11,500,000 - Number of shares outstanding: 12,000 - Expected return on equity: 10.5% per annum Income - Apartment units: 5/12 - Two-Bedroom apartment: 55 units - One-Bedroom apartment: 150 units - Studio apartment: 85 units - Monthly rents for the first year: - Two-Bedroom apartment: 1800 per month - One-Bedroom apartment: 945 per month - Studio apartment: 650 per month - The expected vacancy rates are shown below: - Monthly rents are expected to increase each year as shown below: Expenses - The operating expenses for the first year are shown below