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LOS c: Calculate the after-tax cash flow and the after-tax equity reversion from real estate properties. ffice ffice" />
Q1. Assume you are considering investing in an apartment building with the following estimated financial characteristics:
- Net operating income (NOI) = $60,000.
- Net operating income growth rate = 5% per year.
- Tax depreciation = $10,000 per year.
- Annual interest expense = $9,000.
- Annual debt service expense = $12,000.
- Equity investors marginal income tax rate = 36%.
- Investment horizon = four years.
The year-2 and year-3 cash flow after taxes is closest to:
A) CFAT2 = $31,600 and CFAT3 = $33,400.
B) CFAT2 = $35,160 and CFAT3 = $37,176.
C) CFAT2 = $33,240 and CFAT3 = $37,176.
Correct answer is B)
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Taxes Payable Computation: |
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Year-1 |
Year-2 |
Year-3 |
Year-4 |
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NOI (g = 5%) |
$60,000 |
$63,000 |
$66,150 |
$69,458 |
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Less depreciation |
(10,000) |
(10,000) |
(10,000) |
(10,000) |
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Less interest |
(9,000) |
(9,000) |
(9,000) |
(9,000) |
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Taxable income |
41,000 |
44,000 |
47,150 |
50,458 |
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times tax rate |
′0.36 |
′0.36 |
′0.36 |
′0.36 |
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Income taxes payable |
$14,760 |
$15,840 |
$16,974 |
$18,165 |
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CFATt Computation: |
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Year-1 |
Year-2 |
Year-3 |
Year-3 |
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NOI (g = 5%) |
$60,000 |
$63,000 |
$66,150 |
$69,458 |
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Less debt service |
(12,000) |
(12,000) |
(12,000) |
(12,000) |
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Before tax cash flow |
$48,000 |
$51,000 |
$54,150 |
$57,458 |
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Less taxes payable |
(14,760) |
(15,840) |
(16,974) |
(18,165) |
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CFAT |
$33,240 |
$35,160 |
$37,176 |
$39,293 |
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发表于 2009-3-10 10:09
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