6. The tax effect of interest payments on loans to make real estate investments Eileen invested in residential real estate for $400,000 ($340,000 for the building and $60,000 for the land). She financed her purchase with a 30-year mortgage for $300,000 at an interest rate of 7%. A year has passed since her purchase. Eileen is now curious about how her taxes, cash flow, after- tax return, and after-tax yield would have been different if she had paid cash for the property. Elleen's files indicate the following information regarding her investment: Rental revenues were $60,000 The depreciation deduction was $12,364 Eileen paid $20,903 Interest on the mortgage Eileen is in a 25% tax bracket Complete the following table. Assume that all factors except those described above remain constant. For the after-tax yields, round your answers to the nearest decimal and round all other answers to the nearest whole number. Enter all figures as positive numbers, and follow the guidance in the tables to perform the appropriate mathematical operations. Used leverage Paid cash s 5 Gross rental income Less: Annual depreciation deduction Subtotal Less: Interest expense for the year Taxable income 5 1 5 $ S Cash flow after paying interest Less: Income tax liability After-tax return After-tax yield After-tax yield Because Elleen took out a mortgage to finance her investment, she was able to Investment solely with cash in the first year of ownership, it appears to have been a her overall rate of return, compared to making the strategy