Question

Problem 2 Apache's real estate department is considering buying a hangar and leasing it out to private jet operators. They ask you to calculate the NPV and IRR of the investment and have given you the data below. Assume that the hangar is sold in year 25 and that the mortgage runs 25 years. 5.0% Square footage 1,910 Property price ($) 1,015,000 Down payment 10.0% Interest rate 3.9% Closing costs at start 8,000 Broker fee in year 25 Yearly property 1.5% appreciation Rent/sq.ft./Inflator 3.00 Op. costs/yr. ($) /Inflator 11,640 Tax rate 21.0% Depreciation/year ($) 4,524 1.0% 1.0%

Answer 1

Cash Inflow
Year	Annual Rent	Opearating Cost	Cash Inflow	PVF@3.9%	PV of Cash Inflow
1	68,760	11640	57,120	0.9625	54,975.94
2	69,448	11,756	57,691	0.9263	53,441.48
3	70,142	11,874	58,268	0.8916	51,949.85
4	70,843	11,993	58,851	0.8581	50,499.85
5	71,552	12,113	59,439	0.8259	49,090.33
6	72,267	12,234	60,034	0.7949	47,720.15
7	72,990	12,356	60,634	0.7651	46,388.21
8	73,720	12,480	61,240	0.7363	45,093.45
9	74,457	12,604	61,853	0.7087	43,834.82
10	75,202	12,730	62,471	0.6821	42,611.33
11	75,954	12,858	63,096	0.6565	41,421.99
12	76,713	12,986	63,727	0.6318	40,265.84
13	77,480	13,116	64,364	0.6081	39,141.96
14	78,255	13,247	65,008	0.5853	38,049.45
15	79,038	13,380	65,658	0.5633	36,987.44
16	79,828	13,514	66,315	0.5422	35,955.06
17	80,627	13,649	66,978	0.5218	34,951.50
18	81,433	13,785	67,647	0.5023	33,975.96
19	82,247	13,923	68,324	0.4834	33,027.64
20	83,070	14,062	69,007	0.4653	32,105.79
21	83,900	14,203	69,697	0.4478	31,209.67
22	84,739	14,345	70,394	0.4310	30,338.56
23	85,587	14,488	71,098	0.4148	29,491.77
24	86,443	14,633	71,809	0.3992	28,668.61
25	87,307	14,780	72,527	0.3842	27,868.43
PV of Total Rental Income					9,99,065.07
PV of Sale Proceeds of Hanger after 25 years (WN -1)					5,22,427.06
Total Cash Inflow					15,21,492.13
Cash Outflow
Particulars				Amt($)
Hanger Cost				10,15,000
Closing Costs at Start				8,000
Brokerage				50,750
Total Cash Outflow				10,73,750
NPV at 3.9%		(L1)	4,47,742.13
NPV at 6.45%		(L2)	-22422.46
WN-1
Particulars					Amt($)
Hanger Value after 25 years with Appreciation					14,72,710.00
Depreciation For 25 Years					1,13,100.00
					13,59,610.00
PV of Sale Proceeds					5,22,427.06

Calculation Of IRR

IRR =

L1 + (NPV atL2) + (L1 - L2) TNPV atlī) + (L1 – L2)

  

447741.95 = 3.9 +(- (0.45 -3.9) 447741.95年0919)

=6.32%

IRR = 6.32%

Note - tax rates are not considered