Use the information below for the question: 

 

Potential Gross Income: $280,000

Selling Expenses = 3% of sale price

Operating Expenses = $155,000

Vacancy and rent loss = 5% of Potential Gross Rent

Additional Misc. Income = $4,000

Capital expenditures = $8,000

Current price = $1,380,000

Price is expected to appreciate at 6% per year

Average tax rate= 22%

Marginal Tax Rate = 30%

Project Discount Rate = 10%

Levered Discount Rate = 12%

After Tax Discount Rate = 8.4%

Loan: 75% LTV, 30 Years Annual Payments, 5% Interest, no points or other costs

3 year holding period

 

What is the NOI for year 1?

What is the before tax equity reversion?

What is the appropriate discount rate when using Before Tax Cash Flows? (Answer is a percentage from the problem)