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You are considering a real estate investment with the following parameters and a five year holding period

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You are considering a real estate investment with the following parameters and a five year holding period. Calculate the unlevered and levered NPV and IRR. Please make your calculations to the "right of the data" on this worksheet. Based solely on these calculations, would you proceed with the investment and why?

Purchase price        22,000,000

Anticipated NOI

Year 1     1,500,000    

Year 2     1,600,000    

Year 3     1,800,000    

Year 4     2,000,000    

Year 5     2,100,000    

Year 6 (stabilized)   2,150,000

Financing            

LTV       70.0%  

Payment frequency     Monthly  

Mortgage rate     3.5%  

Mortgage rate per month   0.2896%  

Term (years)     5  

Amortization (years)     25

Anticipated cap rate on sale     9.0%

Required Equity Return     15.0%

Required WACC       10.0%