Order the answer to: Eric Heiden has a house and lot for sale for $70,000

Custom Essays business-economics Order the answer to: Eric Heiden has a house and lot for sale for $70,000

business-economics

Order the answer to: Eric Heiden has a house and lot for sale for $70,000

Question Eric Heiden has a house and lot for sale for $70,000. It is estimated that $10,000 is the value of the land and $60,000 is the value of the house. Bonnie Blair is purchasing the house on January 1 to rent and plans to own the house for 5 years. After 5 years, it is expected that the house and land can be sold on December 31 for $80,000. Total annual expenses (maintenance, property taxes, insurance, etc.) are expected to be $3000 per year. The house would be depreciated by MACRS using a 27.5-year straight line rate with midmonth convention for rental property. For , a of zero was used. Bonnie wants a 15% after-tax rate of return on her investment. You may assume that Bonnie has an incremental income tax rate of 27% in each of the 5 years. Capital gains are taxed at 20%. Determine the following: (a) The annual . (b) The capital gain (loss) resulting from the sale of the house. (c) The annual rent Bonnie must charge to produce an after-tax rate of return of 15%. (Hint: Write an algebraic equation to solve for rent.)
Subject business-economics
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