Suppose you purchased a building for $2,000,000 (VALUE). The building is producing a YEAR 1 Net Operating Income (NOI) of $150,000 that will increase 4% annually. At the end of year 5, the building will sell at a 6.0% CAP Rate. You borrow from a bank a loan amount equal to 65% loan-to-value (LTV), paid interest only at 5.0%.

a. Construct a 5-year model (T-Chart) showing cash flow?

b.  What is the sale price at end of Year 5?

c.  What is loan balance needing paid off at the end of year 5?

d. What is the equity (investor) IRR?

Answer rating: 100% (QA)

We need to calculate the cash flows sale price loan balance and equity investor IRR over the 5year p... View the full answer