In: Finance
Potential Gross Income 100,000 sq. ft for the coming year |
||
average rent $15.00 per ft. |
$ 1,500,000 |
|
Less Vacancy Allowance (average 8%) |
$ (120,000) |
|
Effective Gross Income |
$ 1,380,000 |
|
Cleaning expenses (5% of net rev) |
$ (69,000) |
|
Insurance ($ 0.02 per dollar replacement, R.C. = $40 per ft. |
$ (80,000) |
|
Management & Maintenance (11% of revenue) |
$ (151,800) |
|
Reserve for Replacement (savings for major repairs) |
$ (50,000) |
|
Property Taxes ($0.10 per $100 of R.C.) |
$ (4,000) |
|
$ (354,800) |
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Estimated Net Operating Income |
$ 1,025,200 |
What is the NPV of this investment at a discount rate of 12% ? (use purcahse price of 9,500,00)
NPV of the investment = Present value of estimated Net Operating Income - Purchase price
Present value of estimated net operating income = Estimated net operating income / (1 + Discount rate)
= $1,025,200 / (1 + 12%)
= $1,025,200 / 1.12
= $915,357.143
NPV of the investment = $915,357.143 - $9,500,000
= $(-8,584,642.86)