Exhibit 1 gives us an overview of each of the properties, such as the gross purchase price, the depreciable base, estimated sales prices, the amount of the first mortgage and so forth. These assumptions are significant to the calculations used throughout the entire case. In Exhibit 2 we find the first-year project setups. This is important information because we can see how much each real estate property will cost in the first year. This information is also useful in setting up the projected cash flow analysis for each of the four properties. Alison Green had the greatest before tax cash flow with $434,306.53, Ivy Terrace came in second with before tax cash flows of 336,130.99, 900 Stony Walk came in third…show more content… In my sensitivity analysis, I changed the occupancy level for Alison Green from 95% to 96%. Since both John and Judy DeRight have run their own successful businesses, I think they would be able to manage their properties at a higher occupancy level. When Alison Green had 96% occupancy level, the net present value increased from $734,294.38 to $793,293.05. For 900 Stony Walk when I changed occupancy level from 95% to 96% the net present value increased from $699,916.07 to $771,288.07. For Ivy Terrace, which was running at a 93% occupancy level, I increased the occupancy level to 94%. By doing this the net present value changed from $493,033.68 to $546,132.48. The Fowler Building, which was also running at a 93% occupancy level, was increased to 94%. By increasing the occupancy level the net present value for the fowler building increased from $480,480.51 to $534,701.58.
In my second sensitivity analysis I lowered the gross purchase price for each of the properties. I strongly believe that I would be able to negotiate a lower purchase price, due to all my experience and negotiating that I have had with my business career. Judy and John came to me for advice because I am the best in the business and I wanted to deliver them only the best results. For Alison Green, instead of $9,600,000 the gross purchase price would now be 9,500,000. Doing
