1. Your employer, Kent, LLC, is considering an investment in an office building that has the following cash flows: Purchase in Year 0 $ -2,750,000 Year 1. 180,000 Year 2.. 276 Year 3.. 220,000 Year 4 239,000 Year 5 250,000, and a sale @ $3,190,000 takes place EOY 5 The companys weighted average cost of capital that they use as their discount rate for such calculations is 7%

2. In the Kent, LLC example above, assume that the company bought the office building using 70% mortgage debt at an interest rate of 4.00% over 240 months. a) What would be the monthly debt service on the office building? b) What would be the net cash flows after debt service in year 3? c) What would be the balance of the loan at the end of Year 5? d) What would be the total cash flows in Year 5, taking into consideration the cash flows, annual debt service, sale price, and the balance on the loan at the EOY 5? e) What is the leveraged IRR of the project? f) Using the companys hurdle rate (discount rate) for leveraged projects of 11.00%, what is the leveraged NPV of the project?