Part 1 er is considering hange the cash flows he renovations where wner renovate the

Part 1 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 proe if an alternative investment elds 10%? NO renovations Less debt Service B TCF NOI Less interest Depreciation Taxable income Tax ATCF ATCF from sale With renovations NOI Less debt service B TCF Less interest Depreciation Taxable income ATCF ATCF from sale Year 75,000 44671 30,329 75,000 23,575 16,542 34,883 11.860 18,469 Year 85,000 44,671 40.329 23.575 16,542 44.883 15.260 78.750 44,671 34,079 78.750 21.824 16.542 40.384 13.731 20,348 44.671 46.279 90.950 21.824 16,542 52.584 17.879 28,400 80,325 44,671 5.654 80.325 19,923 16,542 43.860 14.912 20.742 274,291 95,498 44,671 50.827 5.498 19.923 16,542 59,033 20.071 3 291