2. The projected net cash flows for two properties (A and B) are shown in the following table:

Annual Net Cash Flow Projections for two properties ($ millions)

Year	1	2	3	4	5	6	7	8	9	10
A	1	1.01	1.0201	1.0303	1.0406	1.0510	1.0615	1.0721	1.0829	12.0305
B	1	.9900	.9801	.9703	.9606	.9510	.9415	.9321	.9227	10.0487

Assume a purchase price of $10 Million for both properties.

(a) What is the expected total return (IRR) on a 10-year investment in each property? Use a

financial calculator or equation solver for this.

(b) If the 10% cap rate represents a fair market value for each property, then which property must

be the riskier investment, so that no mispricing has occurred?