Suppose you have developed the following information for a potential investment:
Current market value is $1,200,000; anticipated loan to value ratio I s .80 with 2 points; and predicated cash flows of
ATCF1 = $38,560
ATCF2 = $41,780
ATCF3 = $37,210
ATCF4 = $39,127
ATER4 = $191,730
Further, assume the investor's minimum required after-tax rate of return on equity is 12%.
Please solve showing all steps:
a. What is the internal rate of return on this potential investment?
b. What is the profitability index on this investment?