Real Estate Principles 3rd Edition by David Ling,Wayne Archer

Exercise 19

With a purchase price of $350,000, a small warehouse provides for an initial before-tax cash flow of $30,000, which grows by 6 percent a year. If the before-tax equity reversion after four years equals $90,000, and an initial equity investment of $175,000 is required, what is the IRR on the project If the required going-in levered rate of return on the project is 10 percent, should the warehouse be purchased