Start$1.002345689 10 TVKey AssumptionsConstruction cost ($)Loan ($)1,000,000500,000Loan interest rateLoan term (yrs.)Hangar space (sq.ft.)Rent ($/sq.ft. per month)4.8%22,0001.30Rent inflator2.0%Operating Costs ($/yr.)140.000Cost inflator2.0%Tax rate21.0%Discount rate6.5%Depreciation/year ($)20,000Cash FlowsRent IncomeRent Income = Square Footage x S1/sq.ft x 12 monthsminus: Operating Costsminus: Interestminus: Depreciation= Taxable Incomeminus: Taxes= Net Incomeminus: Principal= Net Operating Cash Flowminus: Cash Outlay at Startplus: DepreciationTotal Cash FlowsNPVIRRNote: Tax shields are the tax gains from expensing interest and depreciation. The formula is interest or depreciation expense times the tax rate

Net Present Value=(Present Value of Cash Inflows-Present Value of Cash Outflows) IRR is a rate at…

Štart $1.00 2|3 4|5 89 10 TV Key Assumptions Construction cost ($) Loan ($) Loan interest rate Loan term (yrs.) Hangar space (sq.ft.) Rent ($/sq.ft. per month) Rent inflator Operating Costs ($/yr.) Cost inflator Таx rate Discount rate Depreciation/year ($) 1,000,000 500,000 4.8% 22,000 1.30 2.0% 140,000 2.0% 21.0% 6.5% 20,000 Cash Flows Rent Income minus: Operating Costs minus: Interest minus: Depreciation - Taxable Income minus: Taxes - Net Income minus: Principal - Net Operating Cash Flow minus: Cash Outlay at Start plus: Depreciation - Total Cash Flows Rent Income Square Footage x S1/sq.ft x 12 mon NPV IRR Note: Tax shields are the tax gains from expensing interest and depreciation. The formula is interest or depreciation expense times the tax rate 7.

Štart $1.00 2|3 4|5 89 10 TV Key Assumptions Construction cost ($) Loan ($) Loan interest rate Loan term (yrs.) Hangar space (sq.ft.) Rent ($/sq.ft. per month) Rent inflator Operating Costs ($/yr.) Cost inflator Таx rate Discount rate Depreciation/year ($) 1,000,000 500,000 4.8% 22,000 1.30 2.0% 140,000 2.0% 21.0% 6.5% 20,000 Cash Flows Rent Income minus: Operating Costs minus: Interest minus: Depreciation - Taxable Income minus: Taxes - Net Income minus: Principal - Net Operating Cash Flow minus: Cash Outlay at Start plus: Depreciation - Total Cash Flows Rent Income Square Footage x S1/sq.ft x 12 mon NPV IRR Note: Tax shields are the tax gains from expensing interest and depreciation. The formula is interest or depreciation expense times the tax rate 7.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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