A property could be sold today for Kshs.2 million. It has a loan balance of Kshs. 1 million and if sold, the investor would incur a capital gains tax of Kshs.250,000. The investor has determined that if it were sold, she would earn an TRR of 15% on equity for the past 5 years. If not sold, the property is expected to produce after tax cash flow of Kshs.50,000 over the next year. At the end of the year, the property value is expected to increase to Kshs.2.1 million, the loan balance will decrease to Kshs.900,000 and amount of capital gains tax due is expected to increase to Kshs.255,000. Required: a) What is the marginal rate of return for keeping the property one additional year? b) What advise would you give to the investor? (25 marks) A property could be sold today for Kshs.2 million. It has a loan balance of Kshs. 1 million and if sold, the investor would incur a capital gains tax of Kshs.250,000. The investor has determined that if it were sold, she would earn an TRR of 15% on equity for the past 5 years. If not sold, the property is expected to produce after tax cash flow of Kshs.50,000 over the next year. At the end of the year, the property value is expected to increase to Kshs.2.1 million, the loan balance will decrease to Kshs.900,000 and amount of capital gains tax due is expected to increase to Kshs.255,000. Required: a) What is the marginal rate of return for keeping the property one additional year? b) What advise would you give to the investor? (25 marks)