instructions: Fill in cap rate chart above Put together the cap rate vs LTV chart Two important things Why is ROE less than 4% when cap rate is 4% and LTV is 0 b/c of closing costs Look at difference between cap rate of 5% and 6% (when interest is 4.5%) Shows there is good benefit with a 1.5% spreadnot much when it is 0.5%

*please include all excel formulas used. please do not just give answer. thank you!!

Cap Rate (w/ Interest Rate of 4.5%) 0.050 0.060 0.070 0.040 0.045 0.080 0.090 0.100 0.02 Assumptions Purchase Price 1,000,000 Closing Costs 20,000 LTV 0.50 Mortgage 500,000 Interest Rate 0.045 Amortization Life 25 Equity 520,000 Cap Rate 0.0700 0.00 0.10 0.20 0.30 0.40 0.50 LTV 0.60 0.70 NOI Mortgage Addback Principal Payments Return on Equity 70,000 33,350 11,077 9.18% Cap Rate (w/ Interest Rate of 4.5%) 0.050 0.060 0.070 0.040 0.045 0.080 0.090 0.100 0.02 Assumptions Purchase Price 1,000,000 Closing Costs 20,000 LTV 0.50 Mortgage 500,000 Interest Rate 0.045 Amortization Life 25 Equity 520,000 Cap Rate 0.0700 0.00 0.10 0.20 0.30 0.40 0.50 LTV 0.60 0.70 NOI Mortgage Addback Principal Payments Return on Equity 70,000 33,350 11,077 9.18%