This is one question, please answer part a and b.

Question 32 Your employer, Kent, LLC, is considering an investment in an office building that has the following cash flows:

Purchase in Year 0 $ -2,750,000

Year 1. 180,000

Year 2.. 276,000

Year 3.. 220,000

Year 4 239,000

Year 5 250,000, and a sale @ $3,190,000 takes place EOY 5

The companys weighted average cost of capital that they use as their discount rate for such calculations is 8%

In the Kent LLC example above, assume that the company bought the office building using 70% mortgage debt at an interest rate of 4.00% over 240 months.

a. What is the leveraged IRR of the project ?

32.15%

24.58%

21.48%

22.85%

b. Using the companys hurdle rate (discount rate) for leveraged projects of 9.00%, what is the leveraged NPV of the project?

$ 577,943

$ 893,210

$ 591,450

$ 953,378