A property could be sold for 2 million. It has a loan balance of Kshs. 1 million and if sold , the investor would incur a capital gain tax of Kshs 250,000. The investor had determined that if it was sold , she would earn an IRR of 15% on equity for 5 years. if not sold the property is expected to produce after tax cashflow of Kshs. 50,000 over the next year. At the end of the year , property value is expected to increase to Kshs. 2.1 Million , the loan balance will decrease to Kshs.900,000 and amount of capital gain tax due is expected to increase to Kshs. 255,000.

Required:

(a) what is the marginal rate of return for keeping this property one additional year?

(b) What advise would you give the investor?