Consider an apartment property that costs $400,000, of which $300,000 is structure value

(the rest is land). Suppose an investor expects to hold this property for five years and then sell

it for at least what he paid for it (without putting any significant capital into the property). If

the investor's marginal income tax rate is 35%, and depreciation recapture is taxed at 25%,

what is the present value, as of the time of purchase, of the depreciation tax shields obtained

directly by this investor during the five-year expected holding period (including the payback

in the reversion)? Assume taxes are paid annually, with the first tax payment due one year

from present, and assume that DTS for this investor are effectively riskless, and the investor's

after-tax borrowing rate is 5%.