An office building generates the cash flows listed below. The owner is considering spending $55,000 to renovate the building. The renovations will change the cash flows as listed below. Calculate the after-tax internal rate of return on the renovations where the owner plans to sell the building in 3 more years. Should the owner renovate the property if an alternative investment yields 10%?

No renovations
	Year
	1	2	3
NOI	75,000	78,750	80,325
Less debt service	44,671	44,671	44,671
BTCF	30,329	34,079	35,654
NOI	75,000	78,750	80,325
Less interest	23,575	21,824	19,923
Depreciation	16,542	16,542	16,542
Taxable income	34,883	40,384	43,860
Tax	11,860	13,731	14,912
ATCF	18,469	20,348	20,742
ATCF from sale			274,291
With renovations
	Year
	1	2	3
NOI	85,000	90,950	95,498
Less debt service	44,671	44,671	44,671
BTCF	40,329	46,279	50,827
NOI	85,000	90,950	95,498
Less interest	23,575	21,824	19,923
Depreciation	16,542	16,542	16,542
Taxable income	44,883	52,584	59,033
Tax	15,260	17,879	20,071
ATCF	25,069	28,400	30,755
ATCF from sale			314,291