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Case Problem 1. Byron Bass is a commereial real estate broker who also has a keen eye for personal investment opportunities. He has an opportunity to buy Acathat he can aeq apartment building that caters to students. He estimates and that the selire the asset for $1.3 million with purchase costs of 2% the annual deller will take back a $1.2 million first mortgage note with schedule of projervice and principal payments reflected on the following loan balance fallsed cash flows. Bass plans to sell the project when the falls due at the end of the seventh year. ules, in researched Academic Arms and has generated the following sched- "Bass has adequate passive income to offset these losses. 286 Case Problem Academic Arm of seventh yea Academic Arms Apartments Anticipated After-Tax Cash riov seventh year of ownership) 1 of $1,700,000 a. Using the first-year operating - Gross income multiplier (using effective gross income) - Net income multiplier n Operating ratio - Break-even, or default, ratio - Debt-coverage ratio - Overall capitalization rate - Equity dividend rate - Cash-on-cash return b. Using a 12% rate, diseount the expected after-tax cash flows from this investment and determine the following: - Present value - Net present value - Profitability index E Investment value