Calculate annual profit and return on investment

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Kimberly Bishop is thinking about investing in some residential income-producing property that she can purchase for $180,000. Kimberly can either pay cash for the full amount of the property or put up $90,000 of her own money and borrow the remaining $90,000 at 7 percent interest. The property is expected to generate $25,000 per year after all expenses but before interest and income taxes. Assume that Kimberly is in the 32 percent tax bracket. (Hint: Earnings before interest & taxes minus Interest expenses (if any) equals Earnings before taxes minus Income taxes (@32%) equals Profit after taxes.)

Problem a.
Calculate her annual profit and return on investment assuming that she pays the full $180,000 from her own funds.

Reference no: EM132965921

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