Consider the levered DCF model provided to you in tab A3 of the Excel spreadsheet. a. Calculate the maximum price that an investors 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.

Amortization schedule:
	I	P	Ending balance
0			$4,300,000
1	$236,500	$123,321	$4,176,679
2	$229,717	$130,104	$4,046,575
3	$222,562	$137,259	$3,909,316
4	$215,012	$144,809	$3,764,507
5	$207,048	$152,773	$3,611,734
6	$198,645	$161,176	$3,450,558
7	$189,781	$170,040	$3,280,517
8	$180,428	$179,393	$3,101,125
9	$170,562	$189,259	$2,911,865
10	$160,153	$199,669	$2,712,197
11	$149,171	$210,650	$2,501,547
12	$137,585	$222,236	$2,279,311
13	$125,362	$234,459	$2,044,852
14	$112,467	$247,354	$1,797,497
15	$98,862	$260,959	$1,536,539
16	$84,510	$275,311	$1,261,227
17	$69,367	$290,454	$970,773
18	$53,393	$306,429	$664,345
19	$36,539	$323,282	$341,063
20	$18,758	$341,063	$0

$9,800,000 $590,00 5,500,000 cquisitiom Price Expected 1st Year NOI CAP Required Rate of Return Expected NOI Growth Terminal NOI Growth Down Payment Mortgage Rate Manutiry Levered Required Rate Minumum Required D 5.50% 2 11.00% 3.00% CR xt Investor Req Premium Next buyer Required return Mortgage Payment (Annual) DOR Miminum DCR satisfied? $359,821 res 19 End of year NOI PV NOI REV Total PV Total CF $9,800,000 $5,500,000 $5,500,000 $359,821 $230,179 $207,368 $359,821 $247,879 $201,184 $359,821 $266,110 $194,577 $359,821 $284,888 $187,664 $359,821 $304,229 $180,545 $359,821 324,151 $173,304 $359,821 344,670 $166,013 $725,626 $392,033 $12,396,104 $6,697,229 $7,089,262 $13,121,729 $3,460,946 $9,660,783 $4,192,070 $590,000 $546,296 $607,700 $521,005 $625,931 $496,884 $644,709 $473,880 $664,050 $451,941 $683,972 $431,018 $704,491 $411,064 546,296 $590,000 $521,005 $496,884 $625,93:1 $473,880 $644,709 $451,941 $431,018 $411,064 $607,700 i5te $683,972 $704,491 Total PV: $10,421,351 $5,502,726 34 NPV: $621,351 $2,726 $9,800,000 $590,00 5,500,000 cquisitiom Price Expected 1st Year NOI CAP Required Rate of Return Expected NOI Growth Terminal NOI Growth Down Payment Mortgage Rate Manutiry Levered Required Rate Minumum Required D 5.50% 2 11.00% 3.00% CR xt Investor Req Premium Next buyer Required return Mortgage Payment (Annual) DOR Miminum DCR satisfied? $359,821 res 19 End of year NOI PV NOI REV Total PV Total CF $9,800,000 $5,500,000 $5,500,000 $359,821 $230,179 $207,368 $359,821 $247,879 $201,184 $359,821 $266,110 $194,577 $359,821 $284,888 $187,664 $359,821 $304,229 $180,545 $359,821 324,151 $173,304 $359,821 344,670 $166,013 $725,626 $392,033 $12,396,104 $6,697,229 $7,089,262 $13,121,729 $3,460,946 $9,660,783 $4,192,070 $590,000 $546,296 $607,700 $521,005 $625,931 $496,884 $644,709 $473,880 $664,050 $451,941 $683,972 $431,018 $704,491 $411,064 546,296 $590,000 $521,005 $496,884 $625,93:1 $473,880 $644,709 $451,941 $431,018 $411,064 $607,700 i5te $683,972 $704,491 Total PV: $10,421,351 $5,502,726 34 NPV: $621,351 $2,726