Assume that you were given an opportunity to purchase a real estate project using an equity participation loan. The NOI for each year of the holding period are shown below:

Year 1 Year 2 Year 3 Year 4

NOI 124,787 132,225 139,954 148,468

Additional information:

1) Purchase price = $1,900,000

2) Estimated value of land = $500,000

3) Anticipated mortgage terms:

a) Loan to value ratio = .80

b) Interest rate = 5.25%

c) Years to maturity = 25

d) Points charged = 3

e) Prepayment penalty = 2% of outstanding balance

f) Level payment, fully amortized

g) Fixed interest rate, monthly payments

4) Participation terms:

a) Share of NOI = 15.5% over $130,000

b) Share of Appreciation = 18%

5) Future sales price = $2,350,000

6) Estimated selling expenses as proportion of future sales price = 5%

7) Client's minimum required before-tax rate of return on equity = 12%

Calculate:

a. The before-tax cash flows and the before-tax equity reversion (you do not need to calculate the after-tax cash flows or reversion).

b. The before-tax net present value to the investor.

Please Show your work. Thank you.