SUMMARY LOAN INFORMATION: End of Year 3 5 Payment 99 994 99.994 9 99.994 99.994 99 994 Mortgage Balance 871,061 866,667 861,764 856,294 850,191 Interes 96,055 95,600 95,091 94,524 93,891 Principal 3,939 4,394 4,903 5,470 6,103 ear 2 31 5 Before-tax Cash Flow 17,006 20,516 24,131 27,855 31,691 NOI 117,000 120,510 124,125 127,849 131,685 Less: Interest Depreciation Taxable Income Tax (Savings) After-tax Cash Flow Cash flow from sale in year 5 Sales Price 1,449,093 Sales costs 0 Mortgage Balance 850,191 Before-tax cash flow 598.902 Tax on price appreciation XXX Tax on depreciation XXX recapture Total capital gain tax XXX After-tax cash flow from sale XXX ATIRR on Equity Year 1 2 3 4 5 ATCF ATIRR on Equity 12.45% Effective Tax Rate 17.20% a. What is the investor's expected ATIRR? (12.45%) b. What is the effective tax rate? (17.29%) c. Why effective tax rate is lower than investor's marginal tax rate of 36%