You are considering the acquisition of a small office building
The net present value (NPV) of an investment is a measure of its current worth in comparison to the initial cost. The NPV can be calculated by discounting all future cash flows using the required rate of return on levered cash flows, which in this case is 12%. The levered internal rate of return (IRR) is the rate at which the NPV of a project equals zero. It measures how well an investment performs relative to its original cost.