DCF Problem 2: GENERAL DATA Building Data Reversion Data Purchase Price $9,000,000.00 Bldg RSF 100000 Going Out Loan % 75.00% OE/RSF $8.00 Cap Rate 10.50% Loan Amount Rents PSF $18.00 Interest Rate/yr 9.50% Monthly Constant (Rm) Initial Equity Investors Discount Rate Price $9,000,000 15.00% Term/months 300 Loan Monthly PMT Initial Investment Annual DS Before Tax CASH FLOWS Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Potential Gross Income $1,800,000 $1,872,000 $1,946,880 $2,024,755 $2,105,745 $2,189,975 Vacancy & Credit Losses $90,000 $93,600 $97,344 $101,238 $105,287 $109,499 Other Income $0 $0 $0 $0 $0 $0 Effective Gross Income $1,710,000 $1,778,400 $1,849,536 $1,923,517 $2,000,458 $2,080,476 Operating Expenses $800,000 $832,000 $865,280 $899,891 $935,887 $973,322 Net Operating Income $910,000 $946,400 $984,256 $1,023,626 $1,064,571 $1,107,154 Debt Service Before Tax Cash Flow Property Reversion Value less: costs of sale -$843,546 Remaining Loan Balance Net Sale Proceeds You need to fill in the blanks to answer the questions below: Now, based on DCF Problem 2 : answer some questions: (2 points each) 1. What is the OER in year 1? _________________________________ 2. What is the DCR in year 1? ________________________________ 3. What is the IRR on equity? _______________________________ 4. What is the GPV of the equity? ____________________________ 5. Does this investment experience positive financial leverage? How do you know? 6. What proportion of the IRRe is attributable to Cash Flows? ________________________________ 7. What proportion of the IRRe is attributable to Reversion? ____________________________________