Problem:

A retail shopping center is purchased for $5.0 million. During the next four years, the property appreciates at 2.25 percent per year (compounded). At the time of purchase, the property is financed with a 75 percent loan-to-value ratio for 15 years at an 8 percent annual interest rate with monthly amortization. At the end of year 4, the property is sold with 6 percent selling expenses.

Required:

Question: What is the before-tax equity reversion?

Note: Provide support for your rationale.