You are considering the acquisition of a small office building. The purchase price is $$775,000.$ Seventy$-$five percent of the purchase price can be borrowed with a $30-$year, $7\mathrm{.}5$ percent mortgage. Payments will be made annually. Up front financing costs will total $3$ percent of the loan amount. The expected before$-$tax cash flows from operations, assuming a five$-$year holding period, are as follows:

Year BTCF

$1$ $ $48,492$

$253,768$

$359,282$

$465,043$

$571,058$

The before$-$tax cash flow from the sale of the property at the end of $5$ years is expected to be $$295,050.$

Required:

a$.$ What is the net present value of this levered investment, assuming a $12$ percent required rate of return on levered cash flows?

b$.$ What is the levered internal rate of return on equity?