You are considering constructing a luxury apartment building project that requires an investment f $15.500,000, which comprises $12,000,000 for the building and $3,500,000 for land. The building has 50 You expect the maintenance cost for the apart- ment building to be $350,000 the first year and 400.000 the second year, after which it will continue to increase by $50,000 in subsequent years. The cost o hire a manager for the building is estimated to be $85,000 per year. After five years of operation, the apartment building can be sold for $17,000,000 What is the annual rent per apartment unit that will rovide a return on investment of 15% after tax? As- sume that the building will remain fully occupied dur- ing the five years. Assume also that your tax rate is 35%. The building will be depreciated according to 39-year MACRS and will be placed in service in Jan uary during the first year of ownership and sold in December during the fifth year of ownership.

Refer to the data in Problem 10.3. If the firm expects to borrow the initial investment ($15,500,000) at 10% over five years (paying back the loan in equal annual payments of $4,088,861), determine the pro- ject's net cash flows