You$$re considering purchasing an apartment for $$200,000.$ You believe that you can earn an initial rental income of $$12,000$ per year on it and that the rental income will grow at $3\%$ per year. You also believe that you can sell the apartment for $$225,000$ after $5$ years. The IRR calculation is shown below: Which of the following statements about this analysis is$/$are NOT valid?Apartment Purchase and Sale $-$ IRR Estimate Which of the following statements about this analysis is$/$are NOT valid?

A

If this $8\mathrm{.}5\%$ IRR exceeds the expected annualized return on other, similar apartments in this area, then this apartment may be a better investment option than the others.

B

You could have come up with a quick approximation for the IRR by observing that $$12/$ $$200=6\mathrm{.}0\%,$ and $$25/$ $$200=12\mathrm{.}5\%$; $12\mathrm{.}5\%/5=2\mathrm{.}5\%,$ and $6\mathrm{.}0\%+$ $$2\mathrm{.}5\%=8\mathrm{.}5\%.$

C

This $8\mathrm{.}5\%$ IRR means that if you invested $$200,000$ and earned $8\mathrm{.}5\%$ on it each year, compounded annually, then you$$d end up with the $$239,000$ total shown at the end of Year $5.$

D

This $8\mathrm{.}5\%$ IRR means that if you invested $$200,000$ and earned $8\mathrm{.}5\%$ on it each year, compounded annually, then you$$d end up with the ~$$289,000$ in total cash flows shown over Years $15.$

E

Statements B$,$ C$,$ and D are all invalid.

F

Statements B and C are invalid.

G

Statements C and D are invalid.