DCF Modeling Question

[Carlos Bermudez]

I am looking at purchasing a real estate investment property. I have created a detailed DCF model to analyze the investment and have stumbled across a couple of questions that I hope you guys can help me answer. I have numbered my questions below and also attached a very simplified version of a DCF valuation to illustrate my questions. The relevant cells are highlighted in green. Thanks in advance!

1. 1. Should the time 0 investment only include the cash investment (down payment) or the full purchase price (down payment AND mortgage amount)? It seems to me that it should only be the cash investment.
2. 2. In the year that the investment property is sold, should the cash flows include not only the cash inflow from the sale of the property but also a cash outflow equal to the mortgage balance on the Balance Sheet at the time? Seems to me it should include both.
3. 3. In calculating the Net Present Value of the investment, what is the appropriate methodology to use in arriving at a discount rate? I am familiar with CAPM and WACC but i don't know which, if either, is appropriate to use.