Question

what is the before tax unlevered IRR ( internal rate of return) for this investment?

AutoSave on H Copy of Exhibit 1 (Q1,02,05,010)-2 - Protected View Search File Home Insert Page Layout Formulas Data Review View Help PROTECTED VIEW Be careful files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View Enable Editing Purchase Price Loan Amount Interest Rate Amortization $9.36 million 75% of purchase price 5.50% per year with monthly payments and compounding 30 years Year Year 7 8 9 Net Operating Income Before Tax Cash Flow After Tax Cash Flow $540,000 $61.695 $36.941 $553,500 $73,195 $75.195 $44,501 $567,338 $89,033 so $52,201 $581,521 I $103,216 $60,039 Future Selling Price Net Sale Proceeds Before-Tax Cash Flow After Tax Cash Flow $596050 $117.754 $68,018 $9.934,317 $9,437,601 $2,946,867 $2,825,238

Answer 1

Please see the table below. Please be guided by the second column titled “Linkage” to understand the mathematics. The last row highlighted in yellow is your answer. Figures in parenthesis, if any, mean negative values. All financials are in $. Adjacent cells in blue contain the formula in excel I have used to get the final output.

К М O P Q Linkage 2 4 1 3 5 48 Year 49 Initial investment (9,360,000) |в 567,338 581,521 50 NOI 540,000 553,500 596,059 51 Net sales proceeds с 9,437,601 (9,360,000) 540,000 6.19% IRR (L52:Q52) 52 Net before tax unlevered cash flows D = A + B + C 567,338 581,521 10,033,660 553,500 53 IRR