2. In the coming year, the Sandbergs expect a potential rental property investment costing $120,000 to have
Question:
2. In the coming year, the Sandbergs expect a potential rental property investment costing $120,000 to have gross potential rental income of $20,237, vacancy and collection losses equaling 4% of gross income, and operating expenses of $9,599. The mortgage on the property is expected to require annual payments of$8,513. The interest portion of the mortgage payments and the depreciation are given below for each of the next 3 years. The Sandbergs are in the 25% marginal tax bracket.
Year | Interest | Depreciation | |
1 | $8,313 | $4,209 | |
2 | 8,213 | 4,209 | |
3 | 8,113 | 4,209 |
The net operating income is expected to increase by 6% each year beyond the first year.
a. Calculate the net operating income (NOI) for each of the next 3 years.
b. Calculate the after-tax cash flow (ATCF) for each of the next 3 years.
Accounting Principles
ISBN: 978-0470533475
9th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso