Compute the approximate investment value

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Reference no: EM132057086

William Smith, the junior partner in the firm of Jones, Brown, and Smith, has been offered, for $2.15 million, an apartment complex that is expected to generate after-tax cash flows from operations as indicated in the following chart.

The forecast incorporates a first mortgage loan of $1.5 million. Smith expects to sell the property after seven years, and the best estimate of after-tax cash flow from disposal is $740,000.

Using a 10 percent discount rate, compute the following:

a. Net Present Value

b. Profitability Index

c. Approximate Investment Value

Year	Exp. ATCF
1	$60,000
2	$70,000
3	$80,000
4	$87,000
5	$93,000
6	$99,000
7	$105,000

Reference no: EM132057086

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