3.

Before Tax Cash Flow (BTCF), After Tax Cash Flow (ATCF) \& After Tax Equity Reversion (ATER) You purchased an office building for $10,000,0005 years ago. It was depreciated on a straight-line basis over 39 years. Assume 20% was assigned to land value, assume no real property. Your expectations include: - Each year gross potential income of $1,700,000 - Vacancy \& collection losses equal to 12% of PGI - Operating expenses =40% of EGI, no escalation - Capital expenditures =5% of EGI, no escalation - Mortgage: 70\% LTV @ 6\% - Mortgage will be amortized over 30 years - Total up-front financing costs =2% of the loan amount. Since we are calculating the 5th year cash flow, recall that this component will be the remaining amortization balance. - Ordinary tax rate =30% - Capital Gains tax =15% - Depreciation recapture tax =20% - Sale Proceeds in year 5=12,000,000 - Selling expenses =4% of sale proceeds 1. Calculate the BTCF in year 5 2. Calculate the ATCF in year 5 3. Calculate the ATER in year 5