You are an employee of consultancy firm. and have been given the following assignment. You are to present an investment analysis of a new small residential income producing property for sale to a potential investor. The asking price for the property is Kshs. 1,250,000; rents are estimated at $200,000 during the first year and are expected to grow at 3 percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 31.5 percent of rent. A 7 percent loan can be obtained at 10 percent interest for 30 years payable monthly. The property is expected to appreciate in value at 3 percent per year and is expected to be owned for five years and then sold.

Required:

What is the investors expected before tax jnternal rate of return on equity invested (BTIRR)