A property could be sold today for $\backslash (\backslash$$ $2\mathrm{.}12\backslash )$ million. It has a loan balance of $\backslash (\backslash$$ $1\mathrm{.}24\backslash )$ million and, if sold, the investor would incur a capital gains tax of $\backslash (\backslash$$ $274,000\backslash ).$ The investor has determined that if it were sold today, she would earn an IRR of $15$ percent on equity for the past five years. If not sold, the property is expected to produce after$-$tax cash flow of $\backslash$$$59,510$ over the next year. At the end of the year, the property value is expected to increase to $\backslash (\backslash$$ $2\mathrm{.}22\backslash )$ million, the loan balance will decrease to $\backslash (\backslash$$ $918,000\backslash ),$ and the amount of capital gains tax due is expected to increase to $\backslash (\backslash$$ $279,000\backslash ).$ The owner determines that if the property were renovated instead of sold, after$-$tax cash flow over the next year would increase to $\backslash (\backslash$$ $103,380\backslash )$ and the property could be sold after one year for $\backslash (\backslash$$ $2\mathrm{.}52\backslash )$ million. Renovation would cost $\backslash (\backslash$$ $274,000\backslash ).$ The investor would not borrow any additional funds to renovate the property. Required: a$.$ What is the rate of return that the investor would earn on the additional funds invested in renovating the property? b$.$ Would you recommend that the property be renovated? Assume that renovation amount if invested elsewhere can earn a higher return with the same or less risk. Complete this question by entering your answers in the tabs below. Required A What is the rate of return that the investor would earn on the additional funds invested in renovating the property? Note: Do not round intermediate calculations. Round your final answer to $2$ decimal places. Required A

Required B

Would you recommend that the property be renovated? Assume that renovation amount if invested elsewhere can earn a higher return with the same or less risk.

Would you recommend that the property be renovated?