The appropriate rate to discount leveraged, after-tax cash flows for a taxable investor is: lower than the rate used to discount leveraged. The cash flow is discounted at the investor's necessary rate of return to determine the after-tax cash flow's present value. The tax rate on rental income is the same as the rate on regular income, but you'll probably also have to pay state taxes on your income.
The level of risk connected with an investment and its future cash flows is higher the larger the discount. The main variable utilized to price a stream of future cash flows is discounting.
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