An investor is considering the acquisition of a modern property that is available at a price of E 2

An investor is considering the acquisition of a modern property that is available at a price of E 2. 150.000. Buying costs of 4% of the price will be incurred. Research of the property market to identify this object has cost the investor E 154.000(so far.) The targeted industrial property has a tenable area of 37812,5 m?; during the first year the tenant is prepared to pay a gross rent of 8 E/m?)As a precaution, some allowance for possible losses to vacancy during the period of analysis will be made. Although this may be unlikely to be the same in each year, 5% of gross rent will be allowed in this and subsequent years. Careful investigation suggests that operating expenses will total E 95.000 p the first year of ownership. Initial market research suggests that the gross rent is likely to increase by 5% pa, and that operating expenses are likely to increase by 2% Da during the period of analysis. The resale value of the property is estimated to be E 2.756:673, with a selling cost of 3% of that value deducted from this amount. Sale of the property is intended in the fifth year after acquisition. The investor determines their cost of capital as being 11%; this rate is also to be used as the internal hurdle rate for investment. Should the investor proceed with this investment or not? Use NPV and IRR to justify your decision. What are major uncertainties in this project evaluation? What would you do to account for these uncertainties?