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You are considering the acquisition of a small office building. The purchase price is $ 7 7 5 , 0 0 0 . Seventy -
You are considering the acquisition of a small office building. The purchase price is $ Seventyfive percent of the purchase price can be borrowed with a year, percent mortgage. Payments will be made annually. Up front financing costs will total percent of the loan amount. The expected beforetax cash flows from operations, assuming a fiveyear holding period, are as follows:YearBTCF$ The beforetax cash flow from the sale of the property at the end of years is expected to be $Required:aWhat is the net present value of this levered investment, assuming a percent required rate of return on levered cash flows?bWhat is the levered internal rate of return on equity?
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