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A private real estate investor plans to purchase a real estate property for $300,000 and sell it after holding it for two years. The true
A private real estate investor plans to purchase a real estate property for $300,000 and sell it after holding it for two years. The true property value decreases by 7.5% each year. Each year the property produces a cash flow equal to 9% of the property's value at the end of the previous year. Depreciation is equal to 5% of the property's value at the end of the previous year. The investor will sell the property at the end of the second year at the property's true economic value. Please show your workings in deial and round your answers to two decimal places a) What is the yields to maturity on this investment after accounting for a 35% income tax rate and assuming that depreciation is a tax-deductible expense? b) What is the yields to maturity on this invesmtnet without accounting for taxes
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