g you work for granite properties and they have asked you to analyze a potential investment. it is a new apartment complex located on s chauncey ave that will have 100 units that will rent each for $1,000 per month (or $12,000 per year) with 95% expected occupancy. they also anticipate operating expenses of 25% of effective gross income, a constant $23,000 per year of capital expenditures, and that pgi will increase by 2% over the next 3 years. last, granite can purchase the property for $12 million today they anticipate they will sell the property at the end of 2 years and granite has a 9% discount rate (i.e., alternative return to equity). answer the following questions. a. what is your current estimated market value of the property using the discounted cash flow approach with $10 million in net sale proceeds received at end of year 2? b. what is your estimated net sale proceeds at the end of year 2 assuming a future buyer will use a 7% cap rate when purchasing the property and you anticipate selling expenses of 7%? c. what is your unlevered net present value of the investment opportunity assuming granite properties receives the net sale proceeds estimated from part b? d. what is the levered irr of the investment with a 2-year $8m interest-only frm loan at 5% with annual payments? should they invest with a 9% discount rate?
