Mrs. Smith inherited a cabin from her parents plus $100,000 in cash. The cabin needs a complete
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Mrs. Smith inherited a cabin from her parents plus $100,000 in cash. The cabin needs a complete remodel that will cost $100,000. |
They rent the cabin out when they are not using it. Rent is collected by a management firm, netted against expenses, and paid to |
Smith's semi-annually. The Smiths want to use their inheritance to fund their children's education. Mrs. Smith can sell the |
cabin now in its current condition for $50,000 (after taxes) and invest the proceeds and the $100,000 at 5%. She could also make |
the improvements to the cabin and wait to sell it when her children are ready to go to school. She would prefer to make the |
improvements and wait so the family can use the cabin as long as selling the cabin later exceeds the proceeds from selling it now. |
The Smith's would like you to recommend the approach. |
Calculate the following |
Net Present Value at 5% |
Net Present Value at 10% |
IRR |
Related Book For
South-Western Federal Taxation 2018 Comprehensive
ISBN: 9781337386005
41st Edition
Authors: David M. Maloney, William H. Hoffman, Jr., William A. Raabe, James C. Young
Posted Date: