You purchased a commercial office buildingfor $2,200,000 one year ago. The appraisalnoted the value of the land was worth$550,000. You financed the purchase througha debt instrument with a loan-to-value ratioof 60% and an interest rate of 8.00%amortized over 25 years. The property's firstyear of operations resulted in an NOI of$250,000. Assume an income tax rate of35%What was the building's cash flow after taxesin year one?O $96,729O $66,765$57,599$91,793

We have the NOI emanating from a commercial building. We have to find the net cash flows after taxes…

Answered: You purchased a commercial office…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 18E

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A property is sold for $7,600,000 and the mortgage balance at the time of sale is $3,600,000. The property was purchased 5 years ago for $4,820,000. Annual depreciation allowances of $140,000 have been taken. The tax rate on capital gains is 15% and the tax rate on depreciation recapture is 25%. What is the after-tax cash flow to equity associated with the sale of the property?
A warehouse was purchased for $9MM ($2MM down +$7MM loan) 5 years ago and is recently sold for $10.1MM gross sales price. Assume the following: 27% of the purchase price was attributable to land value • the current mortgage balance is $6.1MM • 25% tax rate on accumulated depreciation • 15% tax rate on capital gain. • 5% selling cost. What is the tax due on depreciation recapture at sale?
We acquired a property for $10,000,000 including all fees. We financed its purchase with a $7,000,000 loan that carried an annual interest rate of 5.2%, an amortization period of 25 years and a 5-year term. NOI for year 1 was $1,200,000; year 2 was $1,300,000, and for year 3 NOI was $1,400,000. All cash flow after debt service was paid to the equity investors as distributions at the end of every year. We sold this property at the end of year 3 for $11,000,000 net of all disposition fees. Identify the pre-tax annual cash flows to the equity investors and determine the pre-tax IRR to the equity investors for this investment.
Four years ago, an investor purchased a five door-apartment for P5.5M. Income from rent exceeded maintenance and insurance cost by P480,000.00 per year. If the property is sold now for P7.55M with an 8.25% income tax charged from capital gain determine the after tax-rate of return realized on the investment.Ans: 14%
You buy a property for $100,000 in year 0. The building is depreciated using straight-line depreciation over 27.5 year. The NOI is $5,000 in year 1 and grows at 2% thereafter. The building is sold at a the end of year 4 at a terminal cap rate of 6%. Assume an ordinary income tax rate of 35%, a capital gains tax rate of 20%, and a depreciation recapture tax rate of 25%. What is going to be the total tax bill on the sale? O 1,187 O 1,959 O 3,146 O 3,636
You are a small business owner and have purchased a $10,000 asset that you can depreciate over four years ($2,500/per year). Under accelerated depreciation, you would be allowed to depreciate 75% of the asset's value immediately in the first year and the remaining 25% in the second year. Assume that the discount rate is 10%. Further suppose that your business usually makes $56,000 of annual profit, on which it pays a 21% tax every year. Should you claim accelerated depreciation, or should you depreciate the asset over the 4 years at $2,500 per year?
You purchased a property 4 years ago for $959,000. The purchase was financed using a 70.00% Loan to Value ratio, constant payment loan at 5.15% annual interest rate. The loan is fully amortising with monthly payments and a term of 30 years. During this time, the house appreciated at the following rates (assume annual compounding): Year 1 - 7.00%; Year 2 - 6.00%; Year 3 - 5.00%; Year 4 - 3.00% Calculate the average home equity appreciation rate over this period (assume annual compounding). Enter your answer rounded to nearest whole number without the percentage sign (e. g. 45.67% is entered as 46).
An investor purchased an auto body shop for $200,000 using a mortgage of 70 percent of the purchase price. The loan terms were: 6 percent interest rate, 25-year amortization period, 10-year term, 12 payments per year, and loan costs of 2 percent of loan amount. The buyer incurred acquisition costs of $8,000. At the time of purchase the original basis was allocated 75 percent for improvements and 25 percent for land. The projected NOI for year one is $25,000. This investor's marginal tax rate is 28 percent, so what is the cash flow after tax for year one of the projection? O $10,662 O $11,109 O $12,549 O $14,176
-Suppose a 5-year piece of equipment purchased for 500,000 is sold at the end of year 4 after taking four years of straight- line depreciation. Assume that the equipment is sold for 200,000 and the tax rate is 35%. What is the book value? Is there tax savings on the sale? Is there tax effect?
In year 0 you purchase an asset for $500,000 and in year 1 you receive a positive cash flow of $100,000 from operating the asset. Following a MACRS 7-year depreciation schedule (year 1 recovery rate of 14.29 percent) and assuming you are in a 39% tax bracket, what is your year 1 after tax cash flow (ATCF) to the nearest $50 ? O a) $88,750 O b) $28,550 c) $400,000 O d) $380,750 O e) $11,250
ABC, Inc. is considering the purchase of a $116,000 piece of equipment. The equipment is classified as 5-year MACRS property. The company expects to sell the equipment after two years at a price of $50,000. The tax rate is 35 percent. What is the expected after-tax cash flow from the anticipated sale?
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