A company purchased a new office building for $800,000 in June 20016 and sold it in June 2021. Rentals generated net annual revenues of $140,000. The company uses MACRS depreciation, has a combine tax rate of 40%, and a MARR of 10%. Assume the capital gains tax rate is 20%. Determine the net present worth and the rate of return if the building is sold for: a) $1,000,000 b) $600,000 YEAR B.T.C.F. DEP TAX. INC. INC. TAX. A.T.C.F. 0.4 0 -800,000 -800,000 1 70,000 -11,128 58,872 -23,549 46,451 2 140,000 -20,512 119,488 -47,795 92,205 3 140,000 -20,512 119,488 -47,795 92,205 4 140,000 -20,512 119,488 -47,795 92,205 5 140,000 -20,512 119,488 -47,795 92,205 6 70,000 -9,416 60,584 -24,234 45,766 1,000,000 302,592 -81,037 918,963 Total Dep = -102,592 NPW = 52,499 Book Value = 697,408 ROR = 11.43% Tax on salvage value = 200,000* (cap gain tax rate) + 102592 (income tax rate) YEAR B.T.C.F. DEP TAX. INC. INC. TAX. 0.4 A.T.C.F. 0 -$800,000 -$800,000 1 $70,000 -$11,128 $58,872 -$23,549 $46,451 2 $140,000 -$20,512 $119,488 -$47,795 $92,205 3 $140,000 -$20,512 $119,488 -$47,795 $92,205 4 $140,000 -$20,512 $119,488 -$47,795 $92,205 5 $140,000 -$20,512 $119,488 -$47,795 $92,205 6 $70,000 -$9,416 $60,584 -$24,234 $45,766 $600,000 -$97,408 $19,482 $619,482 Total Dep= -102592 NPW = -116550 Book Value = 697408 ROR = 6.39%