An investor is considering buying a property for Sh. 500,000. The cost of land is 20% of the purchase price. The building will be depreciated over 40 years on a straight-line basis. The investor will take a loan of 50% of the purchase price at 10% per annum payable monthly for 25 years. The net operating income for the next three years is Sh. 40,000; Sh. 50,000; and Sh. 60,000. The property can be sold for Sh. 600,000 at the end of year three. Tax on profits is 20%. Capital gains tax is 10% on price appreciation and 20% on depreciation recapture.

Required

Calculate the after-tax equity IRR. Is the project viable assuming the investor has a required rate of return of 15%?