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Calculate the irr

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Ryan is considering the purchase of an apartment complex. The following assumptions are made:

  • The purchase price is $1,000,000.
  • Potential gross income (PGI) for the first year of operations is projected to be $ 171,000.
  • PGI is expected to increase at 4 percent per year.
  • No vacancies are expected.
  • Operating expenses are estimated at 35 percent of effective gross income. Ignore capital expenditures.
  • The market value of the investment is expected to increase 4 percent per year.
  • Selling expenses will be 4 percent.
  • The holding period is 4 years.
  • The appropriate unlevered rate of return to discount projected NOIs and the projected NSP is 12 percent.

Ryan comes to you for financial advice.

Calculate the IRR.

  •  A. 14.22 percent
  •  B. 0.22 percent
  •  C. -14.22 percent
  •  D. 19.22 percent

Reference no: EM132740655

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