Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please show all calculations and equations to fill up the table attached Question A5.2 Steve has a house and lot for sale for $70, 000.

Please show all calculations and equations to fill up the table attached image text in transcribed
image text in transcribed
Question A5.2 Steve has a house and lot for sale for $70, 000. It is estimated that $10,000 is the value of the land and $60 000 is the value of the house. Annthea is purchasing the house on January 1 to rent and plans to own the house for 5 years. After 5 years, it is expected that the house and land can be sold on December 31 for $80,000 (S20,000 for the land and S60,000 for the house). Total annual expenses (maintenance, property taxes, insurance, etc.) are expected to be S3000 a year. The house would be depreciated using a CCA rate of 10%. Annthea wants a 15% after-tax rate of return on her investment. You may assume that Annthea has an incremental income tax rate of 27% in each of the 5 years. Capital gains are taxed at 13.5%. Determine the following: (a) The annual depreciation. (b) The capital gain (loss) resulting from the sale of the house. (c) The annual rent Annthea must charge to produce an after-tax rate of return of 15%

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Companies Audit Investigations And Community Enterprise Act 2004 UK

Authors: The Law Library

1st Edition

1987582950, 978-1987582956

More Books

Students also viewed these Accounting questions

Question

How might creativity be both discouraged and encouraged?

Answered: 1 week ago