1. Projected ownership of 4 years. 2. Rental revenues before taxes of $600,000 at EOY1 increasing annually thereafter by 3.0%. 3. Annual expenses before taxes of $370,000 at EOY1 increasing annually thereafter by 2.0%. 4. Today's asking price for the building is $1,500,000 with an expected selling price of $2,000,000 in 4 years. 5. The Canadian income tax rate on this type of investment is assumed to be 40% (on profits before taxes, capital gains or losses, terminal losses and on recaptured depreciation). 6. Buildings and equipment are to be depreciated using the DB method with a 15% depreciation rate. 7. The half-year rule applies to the depreciation of capital assets. 8. Working capital = $0. 9. You will need a $1,000,000 loan at a 10% rate to finance, in part, your purchase and the required working capital. The loan is to be repaid as follows: EOY1 = 10% of the total loan EOY2 = 25% EOY3 = 35% EOY4 = 30% 10. The annual inflation rate is 4.0%. MARRs are: Before-taxes with inflation = 16.0% Before-taxes without inflation (inflation-free) = 12.0% After-taxes with inflation = 10.0% After-taxes without inflation (inflation free) = 6.0% BTCF = Before-Tax Cash Flows; ATCF = After-Tax Cash Flows CFOE = Cash Flows on Owner Equity 11. 27. The book value of the craft store after four (4) years is 28. The Annual Equivalent Worth (AEW) of the owners' after-tax inflation-free cash flows is 29. The Internal Rate of Return (IRR) of the owners' after-tax and inflation-free cash flows is 30. The purchase price (before-tax) of the craft store was $1.5 million (before tax savings arising from annual depreciation expense). The after-tax purchase price (accounting for annual depreciation expenses during the 4- year period of ownership) is 1. Projected ownership of 4 years. 2. Rental revenues before taxes of $600,000 at EOY1 increasing annually thereafter by 3.0%. 3. Annual expenses before taxes of $370,000 at EOY1 increasing annually thereafter by 2.0%. 4. Today's asking price for the building is $1,500,000 with an expected selling price of $2,000,000 in 4 years. 5. The Canadian income tax rate on this type of investment is assumed to be 40% (on profits before taxes, capital gains or losses, terminal losses and on recaptured depreciation). 6. Buildings and equipment are to be depreciated using the DB method with a 15% depreciation rate. 7. The half-year rule applies to the depreciation of capital assets. 8. Working capital = $0. 9. You will need a $1,000,000 loan at a 10% rate to finance, in part, your purchase and the required working capital. The loan is to be repaid as follows: EOY1 = 10% of the total loan EOY2 = 25% EOY3 = 35% EOY4 = 30% 10. The annual inflation rate is 4.0%. MARRs are: Before-taxes with inflation = 16.0% Before-taxes without inflation (inflation-free) = 12.0% After-taxes with inflation = 10.0% After-taxes without inflation (inflation free) = 6.0% BTCF = Before-Tax Cash Flows; ATCF = After-Tax Cash Flows CFOE = Cash Flows on Owner Equity 11. 27. The book value of the craft store after four (4) years is 28. The Annual Equivalent Worth (AEW) of the owners' after-tax inflation-free cash flows is 29. The Internal Rate of Return (IRR) of the owners' after-tax and inflation-free cash flows is 30. The purchase price (before-tax) of the craft store was $1.5 million (before tax savings arising from annual depreciation expense). The after-tax purchase price (accounting for annual depreciation expenses during the 4- year period of ownership) is