You are considering an investment purchase of a portfolios of net lease properti
ID: 2639214 • Letter: Y
Question
You are considering an investment purchase of a portfolios of net lease properties as follows:
Compute the NPV, IRR and MIRR. Which portfolio do you choose?
Portfolio A Portfolio B Portfolio C Purchase Price $ 300,000,000.00 $ 117,500,000.00 $ 63,,000,000.00 NOI Yrs. 1 to 11 $ 25,000,000.00 $ 10,000,000.00 $ 5,000,000.00 Terminal Cap Rate 8.00% 8.50% 7.00% Discount Rate 8.25% 8.50% 7.00% Reinvestment Rate 4.00% 4.00% 4.00% Terminal Value $ 312,500,000.00 $ 117,647,058.82 $ 71,428,571.43Explanation / Answer
Year A cell PV@8.25% B cell PV@8.5% C cell PV@7% 0 -300000000.0 A1 -300000000.0 -117500000.0 B1 -117500000.0 -63000000.0 C1 -63000000 1 25000000.0 A2 23094688.2 10000000.0 B2 9216589.9 5000000.0 C2 4672897.2 2 25000000.0 A3 21334585.0 10000000.0 B3 8494552.9 5000000.0 C3 4367193.6 3 25000000.0 A4 19708623.5 10000000.0 B4 7829081.0 5000000.0 C4 4081489.4 4 25000000.0 A5 18206580.6 10000000.0 B5 7215742.8 5000000.0 C5 3814476.1 5 25000000.0 A6 16819012.1 10000000.0 B6 6650454.2 5000000.0 C6 3564930.9 6 25000000.0 A7 15537193.6 10000000.0 B7 6129450.9 5000000.0 C7 3331711.1 7 25000000.0 A8 14353065.7 10000000.0 B8 5649263.5 5000000.0 C8 3113748.7 8 25000000.0 A9 13259183.1 10000000.0 B9 5206694.5 5000000.0 C9 2910045.5 9 25000000.0 A10 12248668.0 10000000.0 B10 4798796.8 5000000.0 C10 2719668.7 10 25000000.0 A11 11315166.7 10000000.0 B11 4422854.2 5000000.0 C11 2541746.5 11 25000000.0 A12 10452809.9 10000000.0 B12 4076363.3 5000000.0 C12 2375464 11 312500000.0 A13 130660124.1 117647058.8 B13 47957215.0 71428571.4 C13 33935200 NPV 6989700.7 147058.8 8428571.4 IRR IRR(A1:A13,0.01) =IRR(B1:B13,0.01) =IRR(C1:C13,0.01) IRR 0.08 0.08 0.08 MIRR 2.62 2.63 2.61 For MIRR , excel formulae has been used=MIRR(Range of fund flow,Interest rate,reinvest rate)
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