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Calculate the unlevered internal rate of return

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Reference no: EM132859099

An office building is purchased with the following projected cash flows:

  1. NOI is expected to be $130,000 in year 1 with 5 percent annual increases.
  2. The purchase price of the property is $720,000.
  3. 100% equity financing is used to purchase the property
  4. The property is sold at the end of year 4 for $860,000 with selling costs of 4 percent.
  5. The required unlevered rate of return is 14 percent.

Problem a. Calculate the unlevered internal rate of return (IRR). 21.88%

Problem b. Calculate the unlevered net present value (NPV). $173,732.13

Reference no: EM132859099

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