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help me please A real estate investor is considering purchasing a small warehouse. Analysis has resulted in the following facts: The osking price is $750,000.
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A real estate investor is considering purchasing a small warehouse. Analysis has resulted in the following facts: The osking price is $750,000. There are 22,000sq. Af of leasable area. The expected rent is $3.75/sqft per year: rents are expected to increase at 1.5% for first two years, 2% for the next two years and 3.5% in the final two years. Since the property is leased to an AAA-grade tenant for 25 more years, no vacancy factor is deducted. The tenant will pay all operating expenses except property toxes and insurance. These two expenses will be equal to 18% of EGl each year. The investor can borrow 75% of the total cost for 20 years at an interest rate of 7.75% with monthly payments and up-iront financing costs equal to 3.5% of the amount borrowed. 80% of the total acquisition cost is depreciable over the useful life of 39 years using straight-line depreciafion method. The investor expects to sell the investment at the end of the year 6 and investor's ordinary income tax rate is 35% No capital expenditures have been made since acquisition. Compute the after-tax cash flows from the annual rental operations over the six year period Step by Step Solution
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