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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 lke 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! CHINT: you are doing all math right, the value in cell E14 should be 13,099.94.) (a) if you can earn a 45% annual return on other investments, Investing your money into this house and selling after 2 years is a "1" for "good" or "2" for "bad") idea financially. That's because the calculated IRR is v (use "1" for greater than" or "2" for "lower than the consum.hr 7 2 3 5 6 7 0 w E R T Y o P tab S D F G . J Cane Art Z X C V B N M 26 control Command AVON option Command (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 "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 20% required annual return. The calculated after-tax IRR equals v % (round to 2 decimal places; use "g for any blank values) (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 IRRIS v (use "1" for greater than" or "2" for "lower than") the 45* required annual return. The calculated after-tax IRR equals (round to 2 decimal place, use" for any blank values) Using 45 as your required return, in order for you to be indifferent between buying and not buying for years, the LTV needs to approximately equal CHINT: Use "goal seek in Excel Search are $ 1 2 5 B Q w E R T Y U O A S D F G H J K L Canec Z C V B N M 36 36 control option Command command option