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Young decision. You have the following formation The house you take cont 200.000. You expect home values to increase by to every year Property taxes of house value, out at the end of each year, the words the property se do te end of years are based on the house lot in year Martenance 5000 per year. You would take a home mortgage loan with an LTV of 80% Loan Informacions worm, yong with wederale Sainterest rate, reaning balance due upon house sale. When you sell the house the estimated selling expenses are 15.000 and you can # you interera house to you be paying 1.000 on rent every year You could you in a 2 income tax badet Cac te ber-tax cash flow if you buy rather than er. Use them to calculate the arts internal Rate of Return TIRES The widespreadsheet mit help you to postal information and required calculation in norway all you can sama samal return on the intents, your money into this house and selling after 2 years for yod or for any de francialty Thurs because the vust for greater that for wrth 20 required annual rum The calculated- for any bank values you can see your money and "T" for another the calendar place for any bank for persoonally. That's because the round to deal Search or URL $ 7 2 3 5 1 0 6 7 8 9 des Q W E R T Y U 1 o [ S D F G H K > Z V B Z M V. 1 * of option command command option The house you like costs $200,000. You expect home values to increase by 10% every year. Property taxes: 2% of house value, due at the end of each year. In other words, the property taxes due at the end of year 1 are based on the house value in year o.) Maintenance: $1,000 per year. You would take a home mortgage loan with an LTV of 80%. Loan information: 30-year term, fully amortizing with fixed annual payments, 5% annual interest rate, remaining balance due upon house sale. When you sell the house the estimated selling expenses are $5,000, and you expect no capital gain taxes. if you instead rent a house just like this one, you'd be paying $15,000 on rent every year. Your income puts you in a 25% income tax bracket Calculate the after-tax cash flows if you buy rather than rent. Use them to calculate the after-tax internal Rate of Return (ATIRRI. The attached Excel spreadsheet might help you to put all information and required calculations in an organized way! HINT: If you are doing al math right the value in cel E14 should be 13,099943 (a) if you can earn a 45% annual return on other investments, Investing your money into this house and selling it after 2 years is a "1" for "good" or "2" for "bad") idea financially. That's because the calculated IRR IS (use "1" for "greater than" or "2" for "lower OF THE 5 2 6 9 0 E R w Y T P o S D J F G H K L caps lock > X N V M B N ? 1 V- control option command Cand option wo (a) If you can earn a 45% annual return on other investments, investing your money into this house and selling it after 2 years is a (use v (use "1" for "greater than" or "2" for "lower "1" for "good" or "2" for "bad") idea financially. That's because the calculated IRR IS than the 20% required annual return. The calculated after-tax IRR equals for any blank values). % (round to 2 decimal places; use "0" (b) if you can earn a 45% annual return on other investments, investing your money into this house and selling it after 3 years is a (use "1" for "good" or "2" for "bad") idea financially. That's because the calculated IRR IS (use "1" for greater than" or "2" for "lower than") the 45% required annual return. The calculated after-tax RR equals (round to 2 decimal place; use "O" for any blank values) c) Using 45 as your required return, in order for you to be indifferent between buying and not buying for 3 years, the LTV needs to approximately equal CHINT: Use goal seek in Excel o 1 2 3 5 6 8 7 w E R T Y U o S J D G F H A K as lock Z V B Z M V. 1 * of option command command option The house you like costs $200,000. You expect home values to increase by 10% every year. Property taxes: 2% of house value, due at the end of each year. In other words, the property taxes due at the end of year 1 are based on the house value in year o.) Maintenance: $1,000 per year. You would take a home mortgage loan with an LTV of 80%. Loan information: 30-year term, fully amortizing with fixed annual payments, 5% annual interest rate, remaining balance due upon house sale. When you sell the house the estimated selling expenses are $5,000, and you expect no capital gain taxes. if you instead rent a house just like this one, you'd be paying $15,000 on rent every year. Your income puts you in a 25% income tax bracket Calculate the after-tax cash flows if you buy rather than rent. Use them to calculate the after-tax internal Rate of Return (ATIRRI. The attached Excel spreadsheet might help you to put all information and required calculations in an organized way! HINT: If you are doing al math right the value in cel E14 should be 13,099943 (a) if you can earn a 45% annual return on other investments, Investing your money into this house and selling it after 2 years is a "1" for "good" or "2" for "bad") idea financially. That's because the calculated IRR IS (use "1" for "greater than" or "2" for "lower OF THE 5 2 6 9 0 E R w Y T P o S D J F G H K L caps lock > X N V M B N ? 1 V- control option command Cand option wo (a) If you can earn a 45% annual return on other investments, investing your money into this house and selling it after 2 years is a (use v (use "1" for "greater than" or "2" for "lower "1" for "good" or "2" for "bad") idea financially. That's because the calculated IRR IS than the 20% required annual return. The calculated after-tax IRR equals for any blank values). % (round to 2 decimal places; use "0" (b) if you can earn a 45% annual return on other investments, investing your money into this house and selling it after 3 years is a (use "1" for "good" or "2" for "bad") idea financially. That's because the calculated IRR IS (use "1" for greater than" or "2" for "lower than") the 45% required annual return. The calculated after-tax RR equals (round to 2 decimal place; use "O" for any blank values) c) Using 45 as your required return, in order for you to be indifferent between buying and not buying for 3 years, the LTV needs to approximately equal CHINT: Use goal seek in Excel o 1 2 3 5 6 8 7 w E R T Y U o S J D G F H A K as lock Step by Step Solution
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