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A real estate investor has the following information on a warehouse. Purchase Price is $1, 25,000, 33, 600 leasable square feet. Initial rent of $15/sq.ft. per year and will increase 3 percent per year. Vacancy rate of 6% of gross rent per year. Operating Expenses are 40% of Effective Gross Income, and Capital expenditures are $10,000 per year. Mortgage is 75% LTV ratio, 20 years, annual payments and 10% contract rate. The property is expected to appreciate 5% per year. Assuming that you will sell the property and there is 6% selling cost. a. Compute equity before-tax cash flows in year 1 and year 2. b. What is the equity before-tax return (internal rate of return) at the end of year 2? Assuming that you will sell the property and there is 6% selling cost. A real estate investor has the following information on a warehouse. Purchase Price is $1, 25,000, 33, 600 leasable square feet. Initial rent of $15/sq.ft. per year and will increase 3 percent per year. Vacancy rate of 6% of gross rent per year. Operating Expenses are 40% of Effective Gross Income, and Capital expenditures are $10,000 per year. Mortgage is 75% LTV ratio, 20 years, annual payments and 10% contract rate. The property is expected to appreciate 5% per year. Assuming that you will sell the property and there is 6% selling cost. a. Compute equity before-tax cash flows in year 1 and year 2. b. What is the equity before-tax return (internal rate of return) at the end of year 2? Assuming that you will sell the property and there is 6% selling cost