This residential development project consists of $20$ one$-$bedroom units, $40$ two$-$bedroom units, and $100$ parking spaces. The table below shows market rents, vacancy rate, rent loss rate, operating expenses, capital expenditure allowance for the first year of operation, and expected annual growth rates for the next $7$ years. The bottom part of the table lists the applicable income capitalization rates and development costs.

Questions $[$Answer all questions using Excel$]$

$1.$ Develop $7-$year before$-$ and after$-$CAPEX operating cash flow projections.

$2.$ Estimate the cash flow from the sale of the property at the end of year $7.$

$3.$ Estimate the value of the property once it becomes a fully stabilized asset.

$4.$ Use the DCF method to find the before$-$ and after$-$CAPEX discount rates that an investor who purchases the completed project at the price found in

question $3$ will earn if she operates that property for $7$ years. Explain the difference between the two discount rates and the difference between

the before$-$CAPEX discount and cap rates at the beginning of year $1.$

$5.$ If the developer decides to keep and operate the property for $7$ years after completion, what will be his after$-$CAPEX return under the assumption that the entire investment takes place at the beginning of year $1?$ Why is his return higher than the corresponding return found in question $4?$

$6.$ What is the maximum after$-$CAPEX cap rate that will allow the developer to break once the property is completed? What will be the maximum vacancy rate on the apartments that will allow the developer to earn an after$-$CAPEX return of $10\%$ if he keeps the property for $10$ years?