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Question
An investor is considering renovating a building. The total cost of renovation is expected to be $100,000, of which 75% can be borrowed. Given the after-tax cash flows to the equity investor as showed below, what is the incremental return from renovating?
| 1 | 2 | 3 | 4 | 5 | |
| ATCF after renovation | 9,200 | 10,000 | 12,000 | 14,000 | 316,000 |
| ATCF-no renovation | 10,000 | 10,200 | 10,440 | 10,680 | 160,900 |
A) 9.75%
B) 10.14%
C) 15.32%
D) 12.67%
Answer
This answer is hidden. It contains 19 characters.
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