Chapter 13 Financial Planning Exercise 13 Investing in residential income-producing property Kimberly Bishop is thinking about Investing in some residential Income-producing property that she can purchase for $170,000. Kimberly can either pay cash for the full amount of the property or put up $40,000 of her own money and borrow the remaining $130,000 at 8 percent interest. The property is expected to generate $35,000 per year after all expenses but before interest and income taxes. Assume that Kimberly is in the 24 percent tax bracket. (Hint: Earnings before Interest & taxes minus Interest expenses (if any) equals Earnings before taxes minus Income taxes (@24%) equals Profit after taxes.) Calculate her annual profit and return on investment assuming that she pays the full $170,000 from her own funds. Do not round intermediate calculations. Round the profit to the nearest whole dollar and Rol to two decimal places. Annual pront Return on investment b. Calculate her annual profit and return on investment assuming that the borrows $130,000 at 8 percent. Do not round intermediate calculations, Round the prone to the nearest whole dollar and Ror to two decimal places Annual profits Return on investment What was the effect of using leverage on Kimberly's rate of return