Homework Problem - NPV
Step 1 - calculate the net operating income (NOI)
		1	2	3	4	5	6
	Potential gross income	180,000	185,400	190,962	196,691	202,592	208,669
	-Vacancy & collections loss	18,000	18,540	19,096	19,669	20,259	20,867
	Effective gross income	162,000	166,860	171,866	177,022	182,332	187,802
	-Operating expenses	64,800	66,744	68,746	70,809	72,933	75,121
	-Capital expenditures	8,100	8,343	8,593	8,851	9,117	9,390
	Net operating income	89,100	91,773	94,526	97,362	100,283	103,291
	-Debt service
	Before tax cash flow
Step 2 - calculate the debt service
	Selling price:	1,056,000	8.44%
	Use 12 payments per year
	n = 30 * 12 = 360
	I = 7.0%
	Loan to Value 70%
	Solve for payment (pmt) =
	Multiply ____ *12 = ______ (you are looking at cost over the 12 month period)
Step 3 - calculate the selling price in year 5
	Selling price = NOI/Cap rate
	Selling price = 103,291/.0875 = 1,180,469
Step 4 - calculate the net sales procees after selling expenses
	Sale price	1,180,469
	-Selling expenses @ 4%
	Net sales proceeds
Step 5 - calculate the remaining mortgage balance at the end of year 5
	Go back to step where you calculated the monthly debt service
	To calculate mortage outstanding at end of year 5
	60 gold key and then Input key (since you are on monthly you take 12 * 5 = 60)
	gold key and then Amortization key
	= 60-60 (you are at the end of the 5th year)
	= Principal _____
	= Interest _____
	= ______ (this is your mortgage balance)
Step 6 - calculate your before tax equity reversion
	Net sales proceeds	-	(from Step 4)
	- Remaining mortgage balance		(from Step 5)
	Before tax equity reversion	-
Step 7 - calculate the net present value given the equity investment
0				cfj
1				cfj
2				cfj
3				cfj
4				cfj
5				cfj
	Using 1 payment per year
	Discount rate or I = 14%
	put each entry in the cfj key
	gold key NPV = ______