The following information related to a real estate asset investment that is fully financed using REITS equity Project costs: Land. Ksh 300000 Buildings. Ksh 2500000 Total costs. Ksh 2800000 Operating data: Initial rent Ksh 522100 Growth in rent. 8% per year Vacancy rate. 6% of gross rent Other income. 1% of gross rent Operating expenses. 16% of gross rent for one year Growth in expenses. 7% per year Growth in resale price. 6% Selling expenses. 5% of resale price Depreciation (straight line 27.5 years, mid-month convention Put at service at beginning of the year) Holding period. 5 years Marginal tax rate. 30% Capital gains tax rate. 15% Depreciation recovery tax rate. 25% Estimated sale price. Ksh 3747032 Selling expenses. Ksh 187352 Required: a). Operating cash flows for the first 5 years b). After tax cash flows from the sale of property c). Net present value assuming cost of capital of 15% d). What are the factors that will be considered before investing in the asset
The following information related to a real estate asset investment that is fully financed using REITS equity
Project costs:
Land. Ksh 300000
Buildings. Ksh 2500000
Total costs. Ksh 2800000
Operating data:
Initial rent Ksh 522100
Growth in rent. 8% per year
Vacancy rate. 6% of gross rent
Other income. 1% of gross rent
Operating expenses. 16% of gross rent for one year
Growth in expenses. 7% per year
Growth in resale price. 6%
Selling expenses. 5% of resale price
Put at service at beginning of the year)
Holding period. 5 years
Marginal tax rate. 30%
Depreciation recovery tax rate. 25%
Estimated sale price. Ksh 3747032
Selling expenses. Ksh 187352
Required:
a). Operating cash flows for the first 5 years
b). After tax cash flows from the sale of property
c).
d). What are the factors that will be considered before investing in the asset
Step by step
Solved in 3 steps with 2 images
