What is the net present value for this property

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Question - An income property is under evaluation for purchase with a $515,000 loan (Partially amortizing loan with 8% annual rate for 10 years with a payment of 100,000 at the end. Payments are made annually and happen at the end of each year). We plan to hold the property for 3 years and then sell it at the end of year 3. The NOI for year 1 is 68,000 with a growth rate of 2%. The end capitalization rate is 12%. We assume after year 3, the NOI still increases at a rate of 2%.

Required -

a. With the overall discount rate of 15%, what is the net present value for this property?

b. With the asking price of 289,000, what is the IRR for this investment?

Reference no: EM132944061

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