Suppose that you are the manager of a small company that is contemplating construction of a suburban office block. The cost of buying the land and constructing the building is $725,000. Your company has cash in the bank to finance construction. You forecast a shortage of office space in the area and predict that you will be able to rent out the building for two years at $31,250 a year. You forecast that at the end of that time you will be able to sell the building for $850,000. Thus, there are now two future cash flows--a cash flow of C1 = $31,250 at the end of one year and a further cash flow of C2 = ($31,250 +$850,000) = $881,250 at the end of the second year

1. Calculate the NPV of the office building venture at interest rates of 7, 12, and 17%.
2. At what discount rate (approximately) would the project have zero NPV?