1. Calculate the expected IRR based on the following operating and resale cash flows: IRR PV Total Operating Cash Flow PV Operating Cash Flow PV Resale Partition: Resale Value Cash Flow Cash Flow -$65,000,000 $3,250,000 $3,300,000 $3,500,000 $3,600,000 $3,700,000 $17,350,000 % Allocation Year o Year 1 Year 2 Year 3 Year 4 Year 5 $83,000,000 Totals $83,000,000 2. Partition the IRR. What % of the IRR is attributable to the property's operating cash flows, and what % is attributable to the property's resale? 3. If the investor can deploy its capital into a comparable property that generates 85% of its expected IRR from its property resale, all else equal, which property should the investor choose to invest in? Why?
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