A real estate investor buys an income-producing property for $5,000,000 ($3,100,000 borrowed and $1,900,000 in equity). The investment is expected to generate after-tax cash flows (ATCFs) to the equity position of $210,000 per year for 12 years, and at the end of year 12 the investor expects to sell the property for $4,300,000. After paying off the remaining loan balance and paying all transaction-related fees (including taxes), the investor expects to net $1,600,000 from the property sale (the after-tax equity reversion, or ATER). What is the net present value (NPV) of this investment if the equity investors required after-tax annual rate of return on equity (opportunity cost of money) is 8.5%? [In subsequent question 20 you will be asked to choose the equation to use in computing the annual internal rate of return on this investment.]

• A. $407,506.77
• B. $662,285.49
• C. $243,506.77
• D. $962,285.49
• E. $656,217.27