Purchase of piece of business rental property containing

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Barbara Thompson is considering the purchase of a piece of business rental property containing stores and offices at a cost of $350,000. Barbara estimates that annual receipts from rentals will be somewhere between $35,000 and $45,000 but that annual disbursements, other than income taxes, would be fairly close to $18,000. The property is expected to appreciate at an annual rate of 5%. Barbara expects to retain the property for 10 years once it is acquired. Then it will be depreciated on the basis of the 39-year realproperty class (MACRS), assuming that the property would be placed in service on January 1. Barbara’s marginal tax rate is 30%, and her MARR is 10%. What would be the minimum annual total of rental receipts that would make the investment break- even?

Reference no: EM132241296

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