-Consider the Information in the Table Above

question 28

Multiple Choice

$$\begin{array} { l r } \text { After-tax cash flow from aperations if renovated } & \$ 75,000 \\\text { After-tax cash flow from aperations if not renovated } & \underline{- 60,000} \\\text { Incremental cash flow from aperations } & \$ 15,000 \\& \\\text { Sale proceeds if renovated } & \$ 2,500,000 \\\text { Sale proceeds if nat renovated } & \underline{\mathbf { 2 , 2 5 0 , 0 0 0 }} \\\text { Incremental cash flow from sale } & \$ 250,000 \\\\ \text { Renovation costs }& \$ 250,000\end{array}$$
-Consider the information in the table above. What is the rate of return the investor would earn on the additional funds invested in renovating the property, assuming that the investor would not borrow any additional funds?

• A) 6.0%
• B) 106%
• C) $15,000
• D) $265,000

---

Definitions:

Cash Dividend

A payment of profits by a company to its shareholders in the form of cash, typically issued on a quarterly basis.

Liability

A financial obligation or debt owed by a business to another entity.

Participating Preferred Stock

A type of preferred stock that provides holders the right to dividend payments exceeding the basic fixed rate if the company meets specified financial performance criteria.

Common Shareholders

Individuals or entities that own shares of a company's common stock, granting them rights to dividends and voting in the company.