A property could be sold today for $2 million. It has a loan balance of $1 million and, if sold, the investor would incur a capital gains tax liability of $250,000. The investor has determined that if it were sold today, they would earn an IRR of 15% on equity for the past 5 years. If not sold, the property is expected to produce after-tax cash flows of $50,000 over the next year. At the end of the year, the property value is expected to increase to $2.1 million, the loan balance will decrease to $900,000, and the amount of capital gains tax due is expected to increase to $255,000. Please show all work. a. What is the marginal rate of return for keeping the property one additional year? (2 points) b. What advice would you give the investor? Explain your recommendation. (2 point) 2 2. Refer to the problem above. The owner determines that if the property were renovated instead of sold, after-tax cash flow over the next year would increase to $60,000 and the property could be sold after one year for $2.4 million. Renovation would cost $250,000. The investor would not borrow any additional funds to renovate the property. Please show all work. a. What is the rate of return that the investor would earn on the additional funds invested in renovating the property? (2 points) b. Would you recommend that the property be renovated? Explain your