An investor purchases an income-producing property for $345,000 with 20% apportioned to land value and 80% to the building (4% CCA). To finance the purchase, the investor borrows $200,000 at j = 8% with a 25-year amortization period, a 3-year term, and monthly payments. The property is expected to generate $125,000 in gross potential income per year. This amount is expected to grow at 4% per annum. The vacancy allowance is 2% and the collection loss allowance is 1%. The annual operating expenses are estimated to be $50,000, growing at 6% per annum. The investor has a 40% marginal tax rate. The building has an estimated life of 40 years with no salvage value. The property will be sold at the end of the third year. Your junior analyst has calculated the CCA and income tax payable for you: CCA Income Tax Payable Year 1 $5,520 $20,034 Year 2 $10,819 $18,742 Year 3 $0 $23,909 Note: Answering Questions 17, 18, 19, and 20 will involve preparing pro-forma after-tax income and cash flow statements. Because the course has not yet covered income taxation in depth, the income tax numbers have been provided. However, the answer guide contains all the calculations necessary for creating the after-tax pro-forma, so you may wish to do these calculations for practice later in the course. Based on the information above, determine which of the following represents net operating income for each of the three years in the holding period? Year 1 Year 2 (1) $71,250 $73,100 (2) $72,500 $74,400 (3) $54,840 $56,133 (4) $72,500 $68,100 Year 3 $74,964 $76.316 $57,424 $64,764 Based on the information above, determine which of the following represents after-tax income for each of the three years in the holding period? Year 1 Year 2 Year 3 (1) $48,705 $50,775 $52,873 (2) $27,050 $28,432 $29,827 (3) $28,671 $32,033 $28,964 (4) $15,838 $18,172 $15,936 19. Based on the information above, determine which of the following represents after-tax cash flow for each of the three years in the holding period? Year 1 (1) $20,201 (2) $32,898 (3) $52,932 (4) $15,838 Year 2 $22,446 $36,040 $54,782 $18,172 Year 3 $20,106 $32,737 $56,646 $15,936 20. Assume that the property is sold at the end of the third year and that appreciation is 12.5% per annum compounded annually. The commission charge at the time of sale is 6% of the sale price. The investor is taxed on 50% of his capital gains and the percentage apportionment remains the same (Land -20%; Building - 80%). The structure is in a 4% CCA class. The tax on capital gains will be $23,350 and the tax on the CCA recapture will be $6,536. Which of the following represents the after- tax reversion cash flow? (1) $270,025 (2) $240,552 (3) $152,289 (4) $272,438