标题: SS13 - Real Estate Valuation [打印本页] 作者: IAmNeil 时间: 2011-7-13 13:36 标题: SS13 - Real Estate Valuation
Try the following question to test your knowledge. I will post the answers later.
1. NOI is 64,000
2. Price is 525,000
3. Improvements make up 85.9% of the price. Using a 27.5-year life, SLD gives 16,399 annual tax depreciation.
4. Equity cont.: 131,250
5. Debt cont.: 30-year 8% fixed rate mortgage for 393,750. Monthly payment: 2,889.20. LTV ratio: 75%
6. 36% marginal income tax; 20% capital gains tax; 25% recaptured depreciation tax.
7. Required after-tax return: 12%
8. Holding period: 4 years. NOI expected to grow over holding period 5% annually. Market value at end of year 4 is 777,924. Selling costs are 7% of sales price (market value). Outstanding loan balance at end of year 4 is 378,862.
9. Annual compounding used for the equity TVM calculations.
A. Determine taxes payable (years 1 through 4)
B. Determine after-tax cash flow (years 1 through 4)
C. Determine after-tax equity reversion (end of year 4)
D. Calculate NPV of the investment (12%)
E. Calculate IRR of the investment
F. Explain using the NPV and IRR rules why an investor would or would not invest in this real estate venture.作者: iteracom 时间: 2011-7-13 13:36
calculated on a excel during work time......just 4 fun~
Edited 1 time(s). Last edit at Thursday, May 20, 2010 at 05:20AM by coshair.作者: stalkey 时间: 2011-7-13 13:36
Remember seeing this. Do we have to know how to calc an amortisation schedule here....ie when calulating Income tax payable from NOI - how do we get the interest paid portion?作者: yalo 时间: 2011-7-13 13:36
For calculating after-tax cf (NOI - Annual Debt Service - Tax payable = After-tax CF)
how would you calculate the debt service to get the after-tax CF?
Kalo1: You would get the interest payment by first finding out the interest expense on each month then subracting the monthly payment to get the amount that will go into your principal (which would be a much smaller number than the interest expense at the beginning).
Then subtract the principal paid portion from the loan. Now you have your lowered principal. With that you multiple the interest for month two from the lowered principal (the 2nd month interest would be lower than the first as it is from a lowered principal amt).
Now you have the 2nd month interest payment and subtract that from your monthly payment of 2,889.20 to get the amount that will go into lowering your principal. repeat the process for month 3 to 12. Then you'll get your interest paid for the year. It is very unlikely that the test will ask you to caculate this.. maybe to the 2nd or 3rd month (if it is asking for monthly after tax cf, or 2nd, 3rd year if asking for yearly after-tax cf).作者: DSquaredSlim 时间: 2011-7-13 13:36
F. Decision is to buy based on NPV and IRR, which are greater than zero and 12%, respectively.作者: tarunajwani 时间: 2011-7-13 13:36
ahh~~~ so thats how debt service is calculated.作者: firat 时间: 2011-7-13 13:36
<reposted
Edited 1 time(s). Last edit at Tuesday, May 25, 2010 at 06:28AM by joseph213.作者: Swanand 时间: 2011-7-13 13:36
Thanks ASM299 but do you have the calc to get the below interest payments. The book omits this which makes me think if this came up in the exam they will give you the interest payments (if interest only) and also the debt servicing value when getting to ERAT.
Interest Yr 1 = 31,381
Yr 2 = 31,108
Yr 3 = 30,812
Yr 4 = 30,492
Cheers作者: ayaz_mahmud369 时间: 2011-7-13 13:36
I don't think interest per year can be calculated without a full schedule, or by doing an amortization function with your calculator, right?作者: bolligerallstar 时间: 2011-7-13 13:36
it can be done with the Amort button on your calc.
Use
PV=-393750 N=360 I/Y=8/12
CPT PMT
=2889.20
2nd Amort
P1=1 Down Arrow
P2=12
BAL=390460.75
PRN=3289.25
INT=31381
P1=13
P2=24
PRN=3562.25
INT=31108
25,36
PRN=3857.92
INT=30812
37,48
4178
30492
CP作者: zephyranalyst 时间: 2011-7-13 13:36
Why is depreciation calculated based on the improvement cost and not the total cost?
Looks weird to me.作者: kickthatcfa 时间: 2011-7-13 13:36
it is not weird. this is exactly the example in the text book (douglas Manor, or whatever).
CP作者: brainsX 时间: 2011-7-13 13:36
legendary...although probably wont need it. cheers cpk作者: SFoyil 时间: 2011-7-13 13:36
true, but there is more than improvement on this building. They didn't say here but they are assuming that basically the land cost is $525000 - 451,000 = $74k. The point is that we should depreciate based on total price minus land.
