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An apartment building has the following investment characteristics: Year 1 NOI $2,500,000 Year 2 NOI $2,600,000...

An apartment building has the following investment characteristics: Year 1 NOI $2,500,000 Year 2 NOI $2,600,000 Year 3 NOI $2,704,000 Year 4 NOI $2,812,000 You plan to purchase the asset at a 5% initial cap rate and to sell it 3 years later, also at a 5% cap rate. You plan to use a loan at 60% LTV to purchase the asset. The loan will be interest-only (no amortization) at a 4% annual interest rate. Answer the following:

What is the purchase price?

What is your initial equity investment?

What are the annual mortgage payments?

What is the loan balance at the end of year 3? (Please have process how could you get this number )

What is your expected equity (levered) IRR? ( Please have process how could you get this number)

Thank you !!

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Expert Solution

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ekkarill92 answered 2 years ago
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