a. A real estate investor likes to flip houses. That is, he likes to buy a house at a low price and then flip or sell the house for a higher price. The investor is looking at a foreclosed house that will cost $230,241.00 today. He will invest an additional $45,475.00 in the first year of owning the house to upgrade its features. He then believes he can sell the house for $437,212.00 at the end of the second year.

What is the NPV of this investment if our investor wants to earn a 12.00% annual return on the house?

b. An investor on the Shark Tank has offered an entrepreneur a deal with his company. Part of the deal is the investor wants a royalty on his investment. The investor will lend the entrepreneur $272,508.00 but wants $2.00 per unit sold. The entrepreneur expects to sell 20,115.00 units per year each year going forward in perpetuity. What is the IRR for the investor?