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, 7.5 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
2		53,768
3		59,282
4		65,043
5		71,058

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

Question (Please show all work):

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

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