IEPA 050 Reading/Writing 5 Fall 2019: American Dream theme Name: _________________________ Problem- Solution Argumentative Research Essay: Introduction During the term, you will write a problem-solution research essay where you define one problem individuals face that is related to the American Dream and then provide one solution to this problem. A couple example problems are listed below (you do NOT have to choose one on the list, but any topics not on the list must be approved): 1. Minorities do not have equal access to the American Dream. 2. Upward mobility is hindered by structural economic forces. 3. The American Dream is a false hope because of student debt. 4. The American Dream: families need two salaries to survive. 5. Access to quality health care is a barrier to the American Dream. You will locate evidence from print and electronic sources to help define the problem and support your solution. You will present what you have learned in a focused and effective composition that supports a clear and developed academic thesis in which you try to convince your readers that your solution is best. You will consider one other opposing solution and provide a refutation to this argument to help convince readers that your idea is best. Your paper must: · be 5-7 pages in length (not including title page or reference page). · include research from at least four outside sources to support your thesis. At least three academic sources must be used and no more than one source can be from our reading packet. · be typed and double-spaced with one-inch margins. · be written in 12-point, Times New Roman or other readable font. · include APA in-text citations and an APA Reference Page to document sources. include APA title page, page numbers, and running title. In your essay, you must: · decide on the best solution to your problem (it must be supported by articles) · persuade your reader of your solution with adequate and logical researched evidence · introduce your sources. · summarize/paraphrase main ideas from the sources · summarize/paraphrase major supporting details from the sources · include at least one quotation and two paraphrases from the sources · cite sources correctly. (APA) · analyze, evaluate, interpret, and discuss source ideas when paraphrasing or quoting. · present and refute an opposing solution. · use language effectively to communicate and support your ideas. Working Example Part I We are considering an acquisition of an existing medical office building (MOB) to our portfolio. There are 4 tenants. Tenants 1 and 2 occupy 15,000 and 8,000 square feet respective, at $18.00 per square foot. Tenant 3 has 10,000 at $19.00 and tenant 4 has 4,000 at $21.00. All the leases are presently expected to continue through the 4 year holding period and have CPI increases estimated at 2% per year. The asking price for the property is $3,000,000 of which 75% of the value would be allocated to the building; and vacancy and collection ...

1. IEPA 050
Reading/Writing 5
Fall 2019: American Dream theme
Name: _________________________
Problem-
Solution
Argumentative
Research Essay: Introduction
During the term, you will write a problem-solution research
essay where you define one problem individuals face that is
related to the American Dream and then provide one solution to
this problem. A couple example problems are listed below (you
do NOT have to choose one on the list, but any topics not on the
list must be approved):
1. Minorities do not have equal access to the American Dream.
2. Upward mobility is hindered by structural economic forces.
3. The American Dream is a false hope because of student debt.
4. The American Dream: families need two salaries to survive.
5. Access to quality health care is a barrier to the American

2. Dream.
You will locate evidence from print and electronic sources to
help define the problem and support your solution. You will
present what you have learned in a focused and effective
composition that supports a clear and developed academic thesis
in which you try to convince your readers that your solution is
best. You will consider one other opposing solution and provide
a refutation to this argument to help convince readers that your
idea is best.
Your paper must:
· be 5-7 pages in length (not including title page or reference
page).
· include research from at least four outside sources to support
your thesis. At least three academic sources must be used and
no more than one source can be from our reading packet.
· be typed and double-spaced with one-inch margins.
· be written in 12-point, Times New Roman or other readable
font.
· include APA in-text citations and an APA Reference Page to
document sources.
include APA title page, page numbers, and running title.

3. In your essay, you must:
· decide on the best solution to your problem (it must be
supported by articles)
· persuade your reader of your solution with adequate and
logical researched evidence
· introduce your sources.
· summarize/paraphrase main ideas from the sources
· summarize/paraphrase major supporting details from the
sources
· include at least one quotation and two paraphrases from the
sources
· cite sources correctly. (APA)
· analyze, evaluate, interpret, and discuss source ideas when
paraphrasing or quoting.
· present and refute an opposing solution.
· use language effectively to communicate and support your
ideas.
Working Example
Part I
We are considering an acquisition of an existing medical office
building (MOB) to our portfolio. There are 4 tenants. Tenants
1 and 2 occupy 15,000 and 8,000 square feet respective, at

4. $18.00 per square foot. Tenant 3 has 10,000 at $19.00 and
tenant 4 has 4,000 at $21.00. All the leases are presently
expected to continue through the 4 year holding period and have
CPI increases estimated at 2% per year. The asking price for
the property is $3,000,000 of which 75% of the value would be
allocated to the building; and vacancy and collection losses are
projected at 10% of rents. First year operating expenses include
$120,000 (i.e. taxes, insurance, utilities, maintenance, etc.) and
management estimated at 5% of EGI. Our tax rate is 40% and
all loses are recognized in the year they are incurred. Capital
gains and depreciation recapture are both taxed at 15%. A 70%
loan can be obtained at 10% for 25 years. Both the property
value and operating expenses are expected to grow 4% per year
and our projected holding period is 4 years. Selling expenses
are projected at 4% of the gross sales price. The reinvestment
rate for cash flows is 7% and the discount rate is 12%.
a. What is the before tax IRR and MIRR to the investor under
the proposed mortgage arrangement? Comment on the
differences for the investor yield estimates you just calculated.
b. What is the after tax IRR, and the effective tax rate under
this scenario?
c. Calculate the terminal cap rate based on the information
above.
d. What is the NPV to the equity of the project?
e. Assume the 12% discount rate holds. Examine the equity

5. BTIRR under the following sample of LTVs and interest
charges.
@ 65%
7%
@ 70%
10%
@75%
12%
@80%
15%
Does this project have positive or negative leverage at the given
LTV levels?
Part II
The market where the MOB is located is unstable with extensive
tenant churning and lease buyouts occurring regularly. The
truth is our 10% vacancy and collection loss estimate is fairly
optimistic due to the perceived stability of current leases. A
more realistic estimate (most likely) is 15% and a worst case
(pessimistic) estimate for V&C would be 20%. Let’s assign the
probability of occurrence as follows: 40% for most likely, 35%
for optimistic and 25% for worst case.
Compute the following
a. BTIRR and ATIRR for each scenario (you already have the
optimistic estimate)
b. The expected IRR given the 3 scenarios

6. c. The variance and standard deviation of IRRs and the
coefficient of variation for both before and after tax
d. Are the expected returns in excess of 12%?
e. Extra Credit: Now, assume that the increase in value for year
five is expected to be 6%. What is the marginal return for
keeping the property one additional year? What is your advice?
part I a-d10/17/19ASSUMPTIONS:Asking PriceRent year
1Growth-RentVacancy & Coll. Lossof rentsManagementof
EGIOperating ExpensesLoan-to-ValueLoan InterestLoan
termyearsGrowth in Value/Op ExpensesHolding
PeriodyearsSelling costsof sale priceEquity discount
rateReinvestment rateTax rateCap Gains/Dep Recapture
TaxEquityLoanMontly Mortgage PaymentAnnual Debt
ServiceMortgage Balanceyear end0Year12345PGIVacancy &
Collection LossEGIOperating Expenses Mangement NOIDebt
ServiceBTCFCash flow from sale in year4Sales PriceSelling
costsMortgage BalanceBefore-tax cash flow from saleBTCF
Total(a) BTIRR/MIRR ON EQUITYBTIRR on EquityBTMIRR

7. on Equity (b) AFTER TAX IRR AND EFFECTIVE TAX
RATETaxable Income01234NOIInterestDepreciationTaxable
IncomeTax Cost (Savings)ATCF from OperationsSales
PriceSales costsMortgage BalanceBefore-tax cash flow from
saleSales Price Less Selling CostsOriginal Basis Accumulated
Depreciation Adjusted Basis Capital Gain/Price Appreciation
Depreciation RecaptureCap Gain Tax Depreciation Recapture
TaxTax on Sales ProceedsAfter-tax Cash Flow From SaleATCF
Total ATIRREffective Tax Rate(c) Terminal Cap Rate(d)
NPVEquity NPV(e) Leverage Impact on BTIRRiBTIRR@
65%7%@ 70%10%@75%12%@80%15%
part II10/17/19ASSUMPTIONS:Asking PriceRent year
1Growth-RentVacancy & Coll. Lossof rentsManagementof
EGIOperating ExpensesLoan-to-ValueLoan InterestLoan
termyearsGrowth in Value/Op ExpensesHolding
PeriodyearsSelling costsof sale priceEquity discount
rateReinvestment rateTax rateCap Gains/Dep Recapture
TaxEquityLoanMontly Mortgage PaymentAnnual Debt
ServiceMortgage Balanceyear end0Year12345PGIVacancy &
Collection LossEGIOperating Expenses Mangement NOIDebt
ServiceBTCFCash flow from sale in year4Marginal Return Sales
PriceSelling costsMortgage BalanceBefore-tax cash flow from
saleBTCF Total(a) BTIRR/MIRR ON EQUITYBTIRR on
EquityBTMIRR on Equity (b) AFTER TAX IRR AND
EFFECTIVE TAX RATETaxable

8. Income01234NOIInterestDepreciationTaxable IncomeTax Cost
(Savings)ATCF from OperationsSales PriceSales costsMortgage
BalanceBefore-tax cash flow from saleSales Price Less Selling
CostsOriginal Basis Accumulated Depreciation Adjusted Basis
Capital Gain/Price Appreciation Depreciation RecaptureCap
Gain Tax Depreciation Recapture TaxTax on Sales
ProceedsAfter-tax Cash Flow From SaleATCF Total
ATIRRNOTE this is where the TABLE command comes in
handyPart II Sensitivity Test a-dCalculating Variance of
ReturnsOffice BuildingScenarioBTIRRProbability (P) (Return x
Probability)Deviation (R - Expected R)Squared DeviationP x
(R-Expected R)sqPessimistic (20%)Most Likely
(15%)Optimistic (10%) Expected Return VarianceStandard
DeviationCoefficient of VariationCalculating Variance of
ReturnsOffice BuildingScenarioATIRRProbability (P) (Return x
Probability)Deviation (R - Expected R)Squared DeviationP x
(R-Expected R)sqPessimistic (20%)Most Likely
(15%)Optimistic (10%) Expected Return VarianceStandard
DeviationCoefficient of VariationPart II Marginal Return
Comparison eIf sold year 4If sold year 5Sale priceSelling Costs
Mortgage balanceCapital gain taxCash flowMarginal return =
(Cash flow if sold next year + NOI over next year - Cash
flowfrom sale if sold today) / Cash flow if sold todayMarginal
return = ()