Assist with Project Management

Short 6 question assignment: 1. If the market is indicating that a terminal cap rate of 10% is appropriate, project (a) the net operating income over the holding period (b) estimate the value of the property (c) project the before tax cash flow (d) estimate the IRR on a before tax basis (45 points). 2. Given your estimates above, please address Ms. Longman’s concern of paying too much in at most two sentences.(5 points) 3. Estimate the “going in” cap rate (5 points) 4. What investment vehicle (ownership entity) do you recommend for Ms. Longman’s venture? Why? (5 points) 5. If the legislature increases the property taxes, trace the effect of such an increase on value and Ms. Longman’s expected internal rate of return. (20 points) 6. If Ms. Longman decides to negotiate an increase in the amount borrowed from a 75% loan to value to 85% loan to value (at the same loan rate, term and amortization), trace the effect of such an increase on the debt service coverage ratio and Ms. Longman’s expected internal rate of return (20 points)