You are working for a company which is considering purchasing a number of properties. You have been asked to model each of the available investments to assist in choosing a portfolio (up to a maximum purchase price of $1,700,000) that maximises the value to the company, as measured by an increase in net present value. The companys cost of capital is 8%

INVESTMENT DETAILS

	Property 1	Property 2	Property 3	Property 4a	Property 4b
Purchase Price	$450,000	$550,000	$500,000	$470,000	As 4a
Investment length	5 years	5.5 years	6 years	4 years	As 4a
Overhaul cost	N/A	N/A	N/A	N/A	$125,000 paid 31 Dec 2019
Terminal value	$500,000	$575,000	$550,000	$570,000	$675,000
Rental revenue	$45,000 per year Paid monthly Indexed at 2.5%	$60,000 per year Paid quarterly (starting March) Indexed at 3%	$55,000 per year Paid quarterly (starting January) Indexed at 2%	$55,000 per year Paid monthly Not indexed	Up to overhaul as 4a
					Afterwards: $75,000 per year Paid monthly Not indexed
Operating costs	5% of revenues	$4,500 per year Paid monthly Indexed at 3%	$1,000 in April $3,000 in October Indexed at 2%	$3,000 per year Paid monthly Indexed at 1%	Up to overhaul as 4a Afterwards: 8% of revenues

Question 1: What are the total revenues for Property 1? Question 2: What are the revenues for Property 2 in September 2019? Question 3: What are the costs for property 3 in October 2020? Question 4: What are total revenues less total costs for Property 4a? Question 5: What is the absolute value of difference in operating costs between properties 4a and 4b? Question 6: Using the provided data, calculate the NPV for each project. Question 7: What is the NPV of Property 4a less the NPV values of property 4b? Question 8: Which properties should the company invest in subject to the constraint on purchase price in order to maximize their increase in net present value? **Based on the provided information, which property would you choose to move forward with if you were choosing an investment? Why would you choose this property? **Based on the provided information, which property is the worst choice for investment? Why is it the worst choice? **What additional information would you want to know before making a final selection for a property investment?