A company is planning to move and needs to decide if the new office should be owned or leased. The annual cash flows of owning versus leasing are estimated in the following chart. Assume that the operating cash flows will remain the same over the 10-year holding period. If purchased, the company will invest $325,000 in equity and finance the balance with a 4.5% interest-only (i. e. non amortizing) loan. The after-tax cash flow from sale of the property, after repayment of the debt, at the end of year 10 is projected to be $1,150,000. Own Lease Sales 1,000,000 1,000,000 Cost of goods sold 400,000 400,000 Gross income 600,000 600,000 Operating expenses: Business 130,000 130,000 Real estate 60,000 60,000 Lease payments - 120,000 Total operating expenses 190,000 310,000 NOI 410,000 290,000 Mortgage Interest 112,500 - Depreciation 55,000 - Taxable income 242,500 290,000 Tax 49,500 57,000 After tax net income 193,000 233,000 a. What is the incremental annual after-tax cash flow earned from owning vs leasing