** Please show work and how you arrived at answer!!

Suppose that you are contemplating an investment in an apartment building. Use the informationprovided below to answer the questions that follow:

Type of Property:

Apartment Building

Number of Units:30

Average Rent:$1,500 per unit per month

Expected Growth in Rents:5% per year

Vacancy and Collection Losses:5% of Potential Gross Income

Other Income:$50 per unit per month

Expected Growth in Other Income: 3% per year

Operating Expenses:35% of Effective Gross Income

Capital Expenditures:4% of Effective Gross Income

Selling Expenses:5% of Future Selling Price

Going-Out Cap Rate:6.5%

Expected Purchase Price:$5.25 million

Loan Terms:

Loan Amount:85% of purchase price

Interest Rate:4.5% per year with monthly payments and monthly

compounding

Amortization Term:30 years

a. What is the net present value of the

before-tax unlevered cash flows

if you assume a five-year holding period and a discount rate of 12%?

b. What is the internal rate of return of the

before-tax levered cash flows if you still assume a five-year holding period?