Your friend has a holiday house on the South Coast of New South Wales. She is thinking of listing it with the local real estate agent as short-term rental accommodation. This will require a large investment and so she has consulted you for some advice. She gives you the following information:

I. She paid a local builder $2,000 last month to draw up some plans for renovations.

II. If she goes ahead with the project, renovation costs will be $50,000.

III. She will require a 5 year fully amortising loan of $30,000 from the bank at an interest rate of 4% pa, with monthly payments.

IV. As she will no longer be able to use her house for her own holidays, she estimates her own holiday expenses will increase by $1,000 per year.

V. Rental income is estimated to be $60,000 per year.

Which cash flows should be included in the analysis of her project to renovate and rent the house out to short-term tenants, compared to keeping it for own holidays and not renovating?

a.

I, II, IV and V

b.

II, III and V

c.

I, II, III, IV, V

d.

I, II, III, and V

e.

II, IV and V