Charles Cook, an investor, is considering two financing plans for purchasing a parcel of real estate costing \($50,000.\) Alternative X involves paying cash; alternative Y involves obtaining 80% financing at 10.5% interest. If the parcel of real estate appreciates in value by \($7,500\) in 1 year, calculate

(a) Charles’s net return

(b) his return on equity for each alternative. 

If the value dropped by \($7,500,\) what effect would this have on your answers to parts a and b?