You had a building built 25 years ago for $400.000. The market value today is thought to be $563,000. straight-line depr is being used, with a zero salvage value and a life estimate of 40 years. The building produces rental income of s100,000 per year with operating expenses of $7000 per year. The rental income is expected to increase by 5% each year while operating expenses are expected to increase 2% per year The tax rate is 20% on capital gains and 40% on ordinary income. The overall inflation rate is expected to average 3.4% for each of the next 4 years. a. Assume this building is kept for 4 more years and sold at the end of year 4 for $600,000. What is the IRR? Assume that when this building was built 25 years ago, 25% of its cost was financed with a 40 year loan at 8% per year interest. Redo part a. b A recent engineering graduate from WMU is proposing that you construct another building that will cost 640,000. Depreciation will also be straight line with a 40 year life and zero salvage. This building will produce $135,000 in rental i $9000 ncome the first year increasing by 5% each year with operating expenses of per year, increasing at 2.3% per year. It is expected that this building could be sold in 4 years for 750,000. Calculate the IRR for the new building. d. You think you might be better off to sell the old building, and build the new one. Determine the IRR o the incremental investment neede d to build and operate the new building for the next four years