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Q3. Suppose you are evaluating an investment opportunity in an office building for which you have estimated the following financial characteristics:
- First year net operating income (NOI) = $75,000.
- Growth rate in net operating income = 5% per year.
- Tax depreciation = $10,000 per year.
- Annual interest expense = $9,000.
- Annual total debt service expense = $12,000.
- Equity investors marginal income tax rate = 36%.
- Investment horizon = four years.
The cash flows after taxes for years one and four are closest to:
A) CFAT1 = $42,840 and CFAT4 = $50,406.
B) CFAT1 = $51,480 and CFAT4 = $50,766.
C) CFAT = $42,840 and CFAT4 = $47,760.
Q4. property was purchased for $550,000 and sold after six years for $850,000. Costs associated with the sale were $65,000 and the tax depreciation in each year was $20,000. At the time of the sale, $320,000 remained outstanding on the mortgage. The tax rate on recaptured depreciation is 28% and the long-term capital gains tax rate is 20%. The equity reversion after taxes for this property is closest to:
A) $384,400.
B) $365,600.
C) $449,400. | 
发表于 2009-3-10 10:24
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