IRR and NPV Assignment | Homework For You
May 30th, 2020
Project Assumptions:
- Equity: $200,000
- $400,000, 11-year interest-only loan at 5% APR. (i.e. you pay 5% of the principle every year for ten years and repay the full loan amount when you sell the property. Assume the first payment is due when you sign the loan.)
- Operating expenses (once development is complete): $10,000
- Construction will take 2 full years, with the building opening at the start of year 2.
- You already have one lease signed for half the building starting in year 2 valued at $40,000 annually.
- In year 4 you expect to lease half the remaining space (an additional $20,000 annually) and by year 5 you will have the building fully leased at a total annual cash flow of $80,000.
- Finally, you expect to sell the building at the beginning of year 11 for $1,000,000
- Determine the IRR and NPV (with a required rate of return of 7%). If you choose to answer this question with excel, either upload you excel workbook or take a screenshot and past it into this document.
- Based on the analysis in a, should you go ahead with this project? Explain why or why not. Get Finance homework help today
