NPV & IRR

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School

University of Michigan *

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Course

550

Subject

Finance

Date

Apr 3, 2024

Type

xlsx

Pages

4

Uploaded by krishivhinduja03

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Question 1 Year 1 Year 2 Year 3 PGI $ 250,000.00 $ 262,500.00 $ 275,625.00 Vacancy $ 12,500.00 $ 13,125.00 $ 13,781.25 EGI $ 237,500.00 $ 249,375.00 $ 261,843.75 Operating Expenses $ 106,875.00 $ 110,081.25 $ 113,383.69 NOI $ 130,625.00 $ 139,293.75 $ 148,460.06 DCF $ 120,949.07 $ 119,421.94 $ 117,852.38 PV of cash flows $ 577,812.38 Reversion $ 2,317,518.84 PV of Exit Value $ 1,577,264.38 Total PV $ 2,155,076.76 The new DCF gives a value of 2155076.76 Question 2 NOI year 1 $ 130,625.00 Cap rate 6.50% Direct cap $ 2,009,615.38 Question 3 DCF $ 2,155,076.76 Direct Cap $ 2,009,615.38 Cost Approach Cost Per Unit $155,000.00 # of Units 15 Value $2,325,000.00 Market Approach Market Value Per Unit $140,000.00 # of Units 15 Value $2,100,000.00 Refined Bid Value $ 2,126,453.78 Refined Bid Value is $2,126,453.78 Question 4
Sales Price $2,317,518.84 Less: Selling Expenses ($92,700.75) Equals Before-tax Equity Reversion $2,224,818.09 Year 1 Year 2 Year 3 Annual Before Tax Cash Flows 130,625 139,294 148,460 Plus: Before-tax Equity Reversion Equals Total Cash Flow 130,625 139,294 148,460 NPV 8% Discount Rate $2,091,986.18 Year 0 Year 1 Year 2 ($2,126,453.80) 130,625 139,294 ($2,126,453.80) 130,625 139,294 IRR 7.60% The IRR of this investment is 7.60% Question 5 Undiscounted Cash Flow $2,953,612.00 Equity Investment $ 2,126,453.78 Equity Multiple 1.3889848100898 The equity multiple is 1.39
Year 4 Year 5 Year 6 $ 283,893.75 $ 292,410.56 $ 301,182.88 $ 14,194.69 $ 14,620.53 $ 15,059.14 $ 269,699.06 $ 277,790.03 $ 286,123.74 $ 116,785.20 $ 120,288.75 $ 123,897.42 $ 152,913.86 $ 157,501.28 $ 162,226.32 $ 112,396.26 $ 107,192.72
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Year 4 Year 5 152,914 157,501 $2,224,818.09 152,914 2,382,319 Year 3 Year 4 Year 5 148,460 152,914 2,382,319 148,460 152,914 2,382,319