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.

spreed sheet as below :

Transcribed Image Text:

A Acquisition Price Expected 1st Year NOI CAP Required Rate of Return Expected NOI Growth Terminal NOI Growth Next Investor Req Premium Terminal CAP Next buyer Required return Mortgage Payment (Annual 12 End of year 0 1 2 3 4 5 6 A2 AC $9,500,000 $550,000 5.79% 8.00% 3.00% 2.50% 0.50% 6.00% 8.50% $376,557 PV_NOI $550,000 $509,259 $566,500 $485,682 $583,495 $463,197 $601,000 $441,753 $619,030 $421,301 $637,601 $401.797 Down Payment Mortgage Rate Manutiry Levered Required Rate Minumum Required DCR Loan Amount DCR Miminum DCR satisfied? Mortgage Balance at Sale A9 40 410 A11 12 $5,000,000 5.50% 20 11.00% 1.25 A12 A14 $4,500,000 1.46 REV PV_REV Total PV Yes $3,245,363 Total CF -$9,500,000 $509,259 $550,000 $485,682 $566,500 $463,197 $583,495 $441,753 $601,000 $376,557 $421,301 $619,030 $376,557 $401,797 $637,601 $376,557 DS $376,557 $376,557 Leveraged CF PV(CF) -$5,000,000 $5,000,000 $156,255 $154,162 $151,311 $173,443 $189,943 $376,557 $206,938 $224,443 $242,473 $261,044 $139,565 $147,847 $143,896 A Acquisition Price Expected 1st Year NOI CAP Required Rate of Return Expected NOI Growth Terminal NOI Growth Next Investor Req Premium Terminal CAP Next buyer Required return Mortgage Payment (Annual 12 End of year 0 1 2 3 4 5 6 A2 AC $9,500,000 $550,000 5.79% 8.00% 3.00% 2.50% 0.50% 6.00% 8.50% $376,557 PV_NOI $550,000 $509,259 $566,500 $485,682 $583,495 $463,197 $601,000 $441,753 $619,030 $421,301 $637,601 $401.797 Down Payment Mortgage Rate Manutiry Levered Required Rate Minumum Required DCR Loan Amount DCR Miminum DCR satisfied? Mortgage Balance at Sale A9 40 410 A11 12 $5,000,000 5.50% 20 11.00% 1.25 A12 A14 $4,500,000 1.46 REV PV_REV Total PV Yes $3,245,363 Total CF -$9,500,000 $509,259 $550,000 $485,682 $566,500 $463,197 $583,495 $441,753 $601,000 $376,557 $421,301 $619,030 $376,557 $401,797 $637,601 $376,557 DS $376,557 $376,557 Leveraged CF PV(CF) -$5,000,000 $5,000,000 $156,255 $154,162 $151,311 $173,443 $189,943 $376,557 $206,938 $224,443 $242,473 $261,044 $139,565 $147,847 $143,896