A real estate investor has the following information on an apartment building: Purchase Price is $1,125,000 with acquisition costs of $50,000 33,600 leasable square feet Initial rent of $12/sq. ft. per year and will increase 5 percent per year Vacancy rate of 5% of gross rent per year Operating Expenses are 40% of Effective Gross Income Three financing choices: 1. Mortgage with 75% LTV ratio, 20 years, annual payments and 9% contract rate; 2. Mortgage with 80% LTV ratio, 20 years, annual payments and 10.5% contract rate; 3. Mortgage with 85% LTV ratio, 20 years, annual payments and 13.0% contract rate; Expected increase in value is 3.50% per year, 5% selling expenses Holding period is 3 years and the capital improvement expenditures are assumed to be $10,000 in the first three years. 80% depreciable Investors tax rate is 28%, and capital gain tax rate is 15%. Questions: 1. Compute equity after-tax cash flows in year 1, year 2 and year 3 for each financing choice. 2. What is the equity after-tax return (internal rate of return) for each financing choice and which choice would you like to make? Please show all calculations and formulas in excel