Question: DCF Practice (5 Year Hold) Property Assumptions Purchase Price: $1,000,000 Year 1 Potential Rental Income (PRI): $150,000 PGI annual growth rate: 3% Annual Vacancy and

DCF Practice (5 Year Hold)

Property Assumptions

Purchase Price: $1,000,000

Year 1 Potential Rental Income (PRI): $150,000

PGI annual growth rate: 3%

Annual Vacancy and Credit Loss (VCL): 5%

Over next 6yrs.

Year 1 operating expenses (OER): (Oper. Expense Ratio) 35%

OE annual growth rate (after year 1): 2%

Terminal Cap Rate: 9%

Capitalize 6th yr. NOI at 9%

Anticipated holding period 5 years

Maximum loan-to-value (LTV) ratio: 70%

Interest Rate: 5%

Amortization Period: 20 years

Payments per year: 12

Investors Hurdle Rate (unleveraged) 12%

Investors Hurdle Rate (leveraged) 15%

Please create an Excel model to answer the following questions. You submit your Excel Model through Canvas and answer the questions separately (on Canvas).

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

5. What is the Unleveraged IRR and NPV?

6. What are the DCRs for years 1-5?

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