- Interest Rate Initial Capital Number Of Years 2 83 648074 00 9 Initial Value Flat 1 Initial Value Flat 2 Rent 1 Rent 2 1 (22.2 KiB) Viewed 29 times
- Interest Rate Initial Capital Number Of Years 2 83 648074 00 9 Initial Value Flat 1 Initial Value Flat 2 Rent 1 Rent 2 2 (43.12 KiB) Viewed 29 times
Task 2: Compute the approximate Internal Rate of Return (IRR) for the investment project. The investor wants to assess the sensitivity of the investment project to shifts in the interest rate. Please put these calculations in a separate worksheet labelled 'NPV vs interest rate'. You can use the template if you wish. (a) Create a table in which you consider interest rate values ranging from 0.5% p.a. effective to an appropriate level, with increments of 0.5%. Your table should include the NPV of the rental income stream (net of maintenance and taxes) and the NPV of the buying and selling of the flats (net of capital gains tax). And, for each value of the interest rate compute the total net present value of the project. Hint: there are several different ways you could do this, but one way is to create a row whose entries are the various interest rates; then create a column whose entries are the total of the two net monthly incomes from the first worksheet; fill in the rest by discounting each amount and adding up as appropriate, including the sale of the flats. (b) Make a chart of the NPV of the rental income, the NPV of the buying and selling, and the total NPV as a function of interest rate over an appropriate range. Include this chart in your report. (c) Determine from this plot the approximate internal rate of return of this project.