What is the before-tax internal rate of return, if purchased at the list price, based on the following assumptions?

Assumptions

• List Price - $500,000
• First-year net operating income - $40,000
• Annual growth rate of net operating income - 2.00%
• Property annual appreciation - 2.00%
• Holding period - 3 years
• Sale expenses - None

1 8%

2 9%

3 10%

4. 11%