Attempts Average 12 6. The tax effect of interest payments on loans to make real estate investments Eileen invested in residential real estate for $350,000 ($297,500 for the building and $52,500 for the land). She financed her purchase with a 15-year mortgage for $275,000 at an interest rate of 4%. A year has passed since her purchase. Eileen is now curious about how her taxes, cash flow, after- tax return, and after-tax yield would have been different if she had paid cash for the property. Eileen's files indicate the following information regarding her investment: Rental revenues were $52,500 The depreciation deduction was $10,818 Eileen paid $10,751 interest on the mortgage Eileen is in a 25% tax bracket Complete the following table. Assume that all factors except those described above remain constant. For the after-tax yields, round your answers to the nearest decimal and round all other answers to the nearest whole number. Enter all figures as positive numbers, and follow the guidance in the tables to perform the appropriate mathematical operations. Complete the following table. Assume that all factors except those described above remain constant. For the after-tax yields, round your answers to the nearest decimal and round all other answers to the nearest whole number. Enter all figures as positive numbers, and follow the guidance in the tables to perform the appropriate mathematical operations. Paid cash Used leverage Gross rental income $ $ $ Less: Annual depreciation deduction $ Subtotal GA GA $ Less: Interest expense for the year Taxable income S $ $ Cash flow after paying interest Less: Income tax liability $ $ $ After-tax return After-tax yield % % her overall rate of return, compared to making the Because Eileen took out a mortgage to finance her investment, she was able to investment solely with cash. In the first year of ownership, it appears to have been a strategy