CF from operations Input: Depreciable Life in yrs (NR=39.0, R=27.5) is ... One Two Three 0 0 0 0 864,000 898,560 934,502

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Cf From Operations Input Depreciable Life In Yrs Nr 39 0 R 27 5 Is One Two Three 0 0 0 0 864 000 898 560 934 502 1 (402.41 KiB) Viewed 60 times

CF from operations Input: Depreciable Life in yrs (NR=39.0, R=27.5) is ... One Two Three 0 0 0 0 864,000 898,560 934,502 971,882 (58,313) (51,840) (53,914) (56,070) 812,160 844,646 878,432 913.570 (270.287) (292,342) (259,891) 09.091 552,269 (281,098) Temo 597,334 574,360 621,227 (264,261) (264,261) (264,261) (264,261) [204,201 COT.COM 1204,201 288,008 310,099 333.073 moines 356,966 (109,091) (109,091) (109,091) (109,091) 25,640 28,892 32,557 36,685 204,557 229,900 256,539 284,560 (57,276) (64,372) (71,831) (79,677) (1,500,000) 230,732 245.727 261,242 277,289 (1,500,000) 230,732 245,727 261,242 277.289 NPV = $223,372 (@) 18.0% IRR = 22.24% *Assume as given / shown ** Assume selling expenses are 5% of sales price. Assignment: Calculate the relevant cash fows for this investment and apply the NPV & IRR decision rules to decide whether to pursue this project Assume: a. The asking price for this apartment building is $3.5 million, with the land valued at 20% of the asking price. b. Rents grow 5% per year starting in year two. Everything else is the same. c. Vacancy and bad debt allowance is 5% of PGI. d. Operating expenses are expected to be 40% of EGI each year. e. The estimated value of the property, not including selling expenses, will be $4.0 million at the end of a five-year investment horizon. f. Assume the same mortgage terms at in the original study exercise. You can treat the Debt Service (DS), and Principal as given / shown. g. The CRA Recapture tax is 25%, income tax is 37%, and the capital gain tax rate is 20%. The required return is 18% Year (Cash Outlay) PGI (VCL) EGI (OE) ΝΟΙ (DS) * BTCF (Dep'n) Mtg principal * TI (Tax) (28%) ATCF ATCF on Rev. Total ATCF Zero (1,500,000) Four Cash flow on reversion 27.5 Five 0 Cost Basis 1,010,758 (Acc. dep'n) Book value (60,645) 950.112 (304,036) Gross selling price ** 646,076 (Selling expenses) (264,261) Net selling price 381,815 (Book value) (109,091) Gain on Sale (2 parts) 41.338 314,062 (1) Acc. Dep'n (87,937) CRA Recapture tax (25%) 293,878 2,106,749 (2) Capital Gain 2,400,627 Capital Gain Tax (15%) Net sale proceeds (Total tax due on sale) (Mtg payoff, OLB) ATCF on Rev. Total Taxes (1)+(2) Five 3,500,000 (545,455) 2,954,545 4,400,000 (220,000) 4,180,000 (2,954,545) 1,225,455 545,455 136,364 680,000 102,000 238,364 4,180,000 (238,364) (1,834,887) 2,106,749