Your client is considering purchasing a mixed-use building for $525,000 with a $225,000 down payment and a 30-year $300,000 mortgage with a 7.5% rate (assume monthly payments). No points or fees will be charged.

The property is fully leased, and lease income will be as follows:

• Year 1: $51,200
• Year 2: $59,400
• Year 3: $63,700
• Year 4: $67,300
• Year 5: $72,100
• Year 6: $75,542

Operating expenses will be $25,400 in Year 1 and are expected to increase by 5% annually.

After five years, your client intends to sell the property. He intends to establish the sale price by capitalizing the 6^th year NOI at 10%. He has suggested using a cost of sale estimate of 4%.

Perform a cash flow analysis for this property, rounding all figures to the nearest dollar. What is net present value (NPV) if the owners required rate of return is 12%?

Select one:

a.

-$157,065

b.

-$106,927

c.

$157,065

d.

-$119,880