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A property could be sold today for $2.34 million. it has a loan balance of $168 malion and, if sold, the investor would incur a capital gains tax of $318,000. The investor has defermined that if it were sold today, she would eam an IRR of 15 percent on equity for the post five years. If not sold, the property is expected to produce after-tax cash fow of $75,075 over the next year At the end of the yeat, the property value is expected to increase to $2.44 million, the loan baiance will decrease to $951,000, and the amount of capital gains tox due is expected to increase to $323,000. The owner determines that if the property were renovated instead of sold, after-tax cash flow over the next year would increase to $182,910 and the property could be sold after one year for $274 million. Renovation would cost $318,000 The investor would not borrow any additional funds to renovate the property Required: a. What is the rate of retum that the investor would earn on the additional funds invested in fenovating the property? b. Would you recommend that the property be renovated? Assume that renovation amount if invested elsewhere can eam a higher retum with the same or less risk Complete this question by entering your answers in the tabs below. What is the rate of ceturn that the investor would earn on the additional funds invested in renovating the property? Note: Round your final answer to 2 decimal places

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