Find the after tax cash flows from operations for Year 1. Would the tax liability be...

  

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Find the after tax cash flows from operations for Year 1. Would the tax liability be higher or lower with a 6% interest-only loan? What is the after-tax internal rate of return on this investment? Will you buy? Why or why not? How will the after-tax IRR change if the cost recovery period is reduced to 10 years from 39; Acquisition price (100 % structure, no land) $227,500 LTV 70% APR 6% Loan term (years) Required after-tax IRR 30 12% Marginal tax rate 30% Going-out cap rate 10.25% Holding period if you buy (years) 3 Annual depreciation deduction $5,833 Recovery period (years) 39 Year 1 2 3 Effective Gross Income 35,000 36,050 less: Operating Expenses (12,250) (12,618) 37,132 (12,996) less: CAPX Reserve Net Operating Income 22,750 23,432 24,136 less: Debt Service (11,457) (11,457) (11,457) Before Tax Cash Flow (Operations) 11,293 11,975 12,679 less: Tax Liability (2,465) (2,715) After Tax Cash Flow (Operations) 9,510 9,964 After Tax Cash Flow from Sale 82,888 Total After Tax Cash Flow 9,510 92,852 Find the after tax cash flows from operations for Year 1. Would the tax liability be higher or lower with a 6% interest-only loan? What is the after-tax internal rate of return on this investment? Will you buy? Why or why not? How will the after-tax IRR change if the cost recovery period is reduced to 10 years from 39; Acquisition price (100 % structure, no land) $227,500 LTV 70% APR 6% Loan term (years) Required after-tax IRR 30 12% Marginal tax rate 30% Going-out cap rate 10.25% Holding period if you buy (years) 3 Annual depreciation deduction $5,833 Recovery period (years) 39 Year 1 2 3 Effective Gross Income 35,000 36,050 less: Operating Expenses (12,250) (12,618) 37,132 (12,996) less: CAPX Reserve Net Operating Income 22,750 23,432 24,136 less: Debt Service (11,457) (11,457) (11,457) Before Tax Cash Flow (Operations) 11,293 11,975 12,679 less: Tax Liability (2,465) (2,715) After Tax Cash Flow (Operations) 9,510 9,964 After Tax Cash Flow from Sale 82,888 Total After Tax Cash Flow 9,510 92,852