All expenses are fully deductible and all gains are taxable

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Reference no: EM13941140

Kathy St Andrews is planning to buy a house for $140,000 by borrowing money at the rate of 9%. She expects to rent the house for 6 years, collecting $11,000 annual rent in advance each year. She thinks that she can sell the house for $180,000 after 6 years. Kathy has income tax rate of 30%. She will have to pay $3,500 annually in maintenance and real estate taxes, and she will depreciate the house on a straight-line basis for 25 years. The risk-adjusted discount rate in this project is 12%. If all the expenses are fully deductible, and all gains are taxable, should she undertake this project?

Reference no: EM13941140

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