1st blank option- ($-111,135) ($-123, 483) (-148,180) ($-98,7860

2nd blank option - $478,952 / $554,576 / $100,832 / $327,704

3rd blank option - Have no effect on, reduce, increase

4th blank option- reduce, increase, have no effect on

Assume that your expected annual operating costs-excluding your annual depreciation expense for the commercial property will be 35% of your annual rental income. For the residential property, the annual operating costs (excluding depreciation expense) will be 20% of your annual rental income. The interest rates of the mortgages for the commercial and residential lease properties are expected to be 6% and 4%, respectively. Year 2 Given your other assumptioris, complete the following two tables and then use your computations to answer several questioris. Round al amounts to the nearest whole dollar. (Hint: Don't round intermediate calculations. Also, don't forget that capital gains are taxed at 15% ir properties are sold fo more than their original purchase price.) Small office building Year 1 Year 3 Year 4 Annual rental income Estimated resale value Less: Annual operating expenses Less: Annual depreciation expense Less Annual interest payments (6%) 25,200 22,680 21,420 Less: Taxes (25%) Less: Capital gains tax (15%) Net profit Interest factor (8%) 0.7938 0.2350 PV of Cash flow Total War Cash flows 1-00-0-1400 1-00-0-0-0 1-10-1-042 1:10:00 The net discounted return expected from an investment in the office building-alter deducting the cost of the investments Year 2 Year 4 Year 3 $118,498 $116,175 0 23,235 0 Now perform a comparable analysis for the residencial lease property Rental homes Year 1 Annual rental income $113,897 Estimated resale value 0 Less Anul operating expenses 22,779 Less Annual depreciation expense 5,727 Less Annual interest payments (4%) 8,100 Less: Tames (25%) 19,323 Less: Capital gains tax (15) Net profit S Interest factor (8) 0.9259 PV of Cash flow Total PV of Cash flows $120,868 482,400 24,174 5,727 6.885 23,700 5,727 7,290 5,727 7,695 19,880 20,445 21,021 0 0 0 0.8573 0.7938 0.7350 The net discounted return expected from an investment in the rental homes tract-after deducting the cost of the investment-is Based on the results of your analysis, which of the following statements best reflects your decision regarding the commercial or residential cane opportunities As the rental hames tract has a NPV that is greater than that expected from the office building, it is more financially sound to invest in the residential base property. Because the alice building is expected to generate a negative NPW, you should not consider making this investment O Based on the numbers alone, you should prefer an investment in the office buiding since it has a net present value that is greater than that expected from the residential lease property (rental homes tract). O As the office building has a NPV that is greater than that expected from the rental homes tract, it is more financially sound to invest in the commercial lease property. Because the rental hames tract is expected to generate a negative NPV, you should not consider making this investment O Given that the rental homes tract has a nov that is greater than that expected to be generated by the office building, you should prefer to invest in the residential lease property. Which of the following is not a tax deductible expense for investment property? O Maintenance and repairs O Lost rent resulting from vacancies Interest on a mortgage loan Tax deductible expenses an investment's taxable income, and the return on your investment Assume that your expected annual operating costs-excluding your annual depreciation expense for the commercial property will be 35% of your annual rental income. For the residential property, the annual operating costs (excluding depreciation expense) will be 20% of your annual rental income. The interest rates of the mortgages for the commercial and residential lease properties are expected to be 6% and 4%, respectively. Year 2 Given your other assumptioris, complete the following two tables and then use your computations to answer several questioris. Round al amounts to the nearest whole dollar. (Hint: Don't round intermediate calculations. Also, don't forget that capital gains are taxed at 15% ir properties are sold fo more than their original purchase price.) Small office building Year 1 Year 3 Year 4 Annual rental income Estimated resale value Less: Annual operating expenses Less: Annual depreciation expense Less Annual interest payments (6%) 25,200 22,680 21,420 Less: Taxes (25%) Less: Capital gains tax (15%) Net profit Interest factor (8%) 0.7938 0.2350 PV of Cash flow Total War Cash flows 1-00-0-1400 1-00-0-0-0 1-10-1-042 1:10:00 The net discounted return expected from an investment in the office building-alter deducting the cost of the investments Year 2 Year 4 Year 3 $118,498 $116,175 0 23,235 0 Now perform a comparable analysis for the residencial lease property Rental homes Year 1 Annual rental income $113,897 Estimated resale value 0 Less Anul operating expenses 22,779 Less Annual depreciation expense 5,727 Less Annual interest payments (4%) 8,100 Less: Tames (25%) 19,323 Less: Capital gains tax (15) Net profit S Interest factor (8) 0.9259 PV of Cash flow Total PV of Cash flows $120,868 482,400 24,174 5,727 6.885 23,700 5,727 7,290 5,727 7,695 19,880 20,445 21,021 0 0 0 0.8573 0.7938 0.7350 The net discounted return expected from an investment in the rental homes tract-after deducting the cost of the investment-is Based on the results of your analysis, which of the following statements best reflects your decision regarding the commercial or residential cane opportunities As the rental hames tract has a NPV that is greater than that expected from the office building, it is more financially sound to invest in the residential base property. Because the alice building is expected to generate a negative NPW, you should not consider making this investment O Based on the numbers alone, you should prefer an investment in the office buiding since it has a net present value that is greater than that expected from the residential lease property (rental homes tract). O As the office building has a NPV that is greater than that expected from the rental homes tract, it is more financially sound to invest in the commercial lease property. Because the rental hames tract is expected to generate a negative NPV, you should not consider making this investment O Given that the rental homes tract has a nov that is greater than that expected to be generated by the office building, you should prefer to invest in the residential lease property. Which of the following is not a tax deductible expense for investment property? O Maintenance and repairs O Lost rent resulting from vacancies Interest on a mortgage loan Tax deductible expenses an investment's taxable income, and the return on your investment