Consider an investment in a commercial property with the following assumptions:

Purchase Price

Building value: $85,000

Land Value: $15,000

Total Value: $100,000

Loan Assumptions

Loan amount: $80,000

Interest rate: 5.00%

Term: 10 years

Income assumptions:

NOI : 7000 per year (level)

Income tax rate : 28%

Depreciation: 39 years (Straight line)

Resale price: 100,000

Holding period: 5 years

Construct the operation and reversion pro forma and find out Internal rate of return on property and equity before and after tax. Is the financial leverage positive or negative?