Question: DCF Instructed In-Class Practice Property Assumptions Purchase Price: $4,000,000 Year 1 Potential Gross Income (PGI): $540,000 PGI annual growth rate: 3% Annual Vacancy and Credit

DCF Instructed In-Class Practice Property Assumptions Purchase Price: $4,000,000 Year 1 Potential Gross Income (PGI): $540,000 PGI annual growth rate: 3% Annual Vacancy and Credit Loss (VCL): 10% Over next 4yrs. Year 1 operating expenses (OER): (Operating Expense Ratio) 35% OPEX annual growth rate: 2% Terminal Capitalization Rate: 9% Capitalize 4 th yr. NOI with Terminal Cap Rate Anticipated holding period 3 years Maximum loan-to-value (LTV) ratio: 70% Interest Rate (Loan): 5% Amortization Period: 30 years Payments per year: 12 Investors Discount Rate, aka Hurdle Rate (unleveraged) 15% Investors Discount Rate, aka Hurdle Rate (unleveraged) 15%

1. What is the Loan Amount using the LTV ratio?

2. What is the initial investment (cash or equity investment)?

3. What is the loan balance at the end of 3 years?

4. What is the Annual Debt Service (ADS)?

5. What are the NOIs for years 1-4?

6. What is the Going In overall Capitalization rate?

7. What are the DCRs for years 1-3? (NOI/DS)

8. What are the Cash-on-Cash Returns for years 1-3? (BTCF/Initial Equity Investment)

9. What is the Unleveraged IRR and NPV?

10. What is the Leveraged IRR and NPV?

11. What is the Mortgage Constant?

12. Does this investment meet the investors required rates of return (hurdle rates)?

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