Compute equity after-tax cash flows from month 1 to month 36 for each financing choice ?

What's equity after-tax annual return ?

Problem 4 130 pointsl A real estate investor has the following information on an apartment building Purchase Price is SI, 125,000 with acquisition costs of S35,000 33,600 leasable square feet Initial rent of S1.5sq. ft. per month and will increase at the beginning of each year for 5 percent per year. For example, the first year rent from monthlto month 12 is S1.5/sq. ft., the 2nd year rent from month to month 12 is SI.575 (SI.5 (I+5%), and So on Vacancy rate of5% of gross rent per month. Operating expenses are 25% of effective gross income Three financing choices: 1. Mortgage with 75% LTV ratio, 20 years, monthly payments and 5% annual 2. Mortgage with 80% LTV ratio. 20 years, monthly payments and6% annual rate; 3. Mortgage with 85% LTV ratio. 20 years, monthly payments and 6.5% annual rate; Holding period is 3 years (36 months) and the capital improvement expenditure is assumed to be S20,000 at the end ofthe first year only (12 months) Expected increase in value is 50% in total when sold in year 3 G6 months, 5% selling expenses 75% depreciable with monthly depreciation. Investor's tax rate is 35%, and capital gain tax rate is 15%. Questions: 1. Compute equity after-tax cash flows from month 1 to month 36 for each financing choice. 2. What is the equity after-tax annual retum (internal rate of return) for each financing choice and which choice would you like to make