Your client, a real estate company, is evaluating a real estate project of $15,000,000 that will provide them with yearly NOI of $1,950,000 for the next 10 years and can then be resold for an amount estimated at $20,000,000. They can finance 70% of the purchase price through a 10-year mortgage with an amortization period of 25 years and an interest rate of 7%.

Your client will only proceed with the project if its returns are greater than his WACC or cost of equity. He provides you with the following information about his company:

a) Calculate the unlevered NPV of this investment

b) Calculate the unlevered IRR of this investment

c) Calculate the levered NPV

d) Calculate the levered IRR of this investment

Market value of equity $50,000,000 Cost of equity 25% Market value of debt $75,000,000 Cost of debt 10% Tax rate 30% Market value of equity $50,000,000 Cost of equity 25% Market value of debt $75,000,000 Cost of debt 10% Tax rate 30%