Question
Purchase Price $11.8 million Loan Amount $8.6 million 1 2 3 4 5 Potential Gross Income $1,350,000 $1,412,500 $1,578,125 $1,647,031 $1,719,383 Effective Gross Income $1,125,000
| Purchase Price | $11.8 million |
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| Loan Amount | $8.6 million |
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| Potential Gross Income | $1,350,000 | $1,412,500 | $1,578,125 | $1,647,031 | $1,719,383 |
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| Effective Gross Income | $1,125,000 | $1,181,250 | $1,240,313 | $1,302,328 | $1,367,445 |
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| Net Operating Income | $721,250 | $777,813 | $816,203 | $856,513 | $898,839 |
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| Before-Tax Cash Flow | $84,550 | $118,124 | $162,203 | $195,213 | $236,932 |
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| Future Selling Price | $12,700,000 |
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| Net Sale Proceeds | $11.95 million |
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| Before-Tax Equity Reversion | $5.45 million |
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What is the internal rate of return of the before-tax levered cash flows?
A. 14.73%
B. 15.06%
C. 15.49%
D. 15.83%
E. 16.24%
Please show full solution through a financial calculator.
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