An investor owns a property that he bought a while back.

IF SOLD TODAY, the property will provide the investor with$444,000in cash flow from sale after taxes.

IF HELD, the property will generate the annual after-tax cash flows (ATCF) to the investor in the following amounts:

• $55,000per year for the next13years,
• $88,000per year for7more years after that.
• If held and then sold at the end of this total future holding period, the property is expected to provide$999,000in after-tax cash flow (ATCF) from sale to the investor.

What should the investor do? You also know that the investor can receive a13%rate of return after taxes by instead investing the sales proceeds today in a different investment.

The investor should _______.

1...continue owning the property because the estimated after-tax internal rate of return (ATIRR) is higher than 13%.

2...continue owning the property because the estimated after-tax internal rate of return (ATIRR) is lower than 13%.

3...sell the property because the estimated after-tax internal rate of return (ATIRR) is higher than 13%, and invest proceeds in the other investment.

4...sell the property because the estimated after-tax internal rate of return (ATIRR) is lower than 13%, and invest proceeds in the other investment.

5...sell the property butnotinvest proceeds in the other investment.

6 Can't tell without knowing the cash flows from the other investment.

If the property is held, then the estimated ATIRR for the estimated future holding period (as given above) will equal_________%.

You calculated this ATIRR using "cash flows keys" as part of your calculations:

CFo =

C01 =

F01 =

C02 =

F02 =

C03 =

F03 =

IRR