RE 530 Real Estate Investment and Finance Problem Set 2: Financing An investor would like to purchase a new apartment property that costs $2 million with an initial year NOI of $190,000, and an expected growth rate of 3% per year (in income and value). The building and improvements represent 80% of value and will be depreciated over (1 27.5 per year). Assume a 36% tax bracket for all income and capital gains taxes. The investor faces the decision of whether to use 70% or 80% financing. The 70% loan can be obtained at 10% interest for 25 years. The 80% loan can be obtained at 11% interest for 25 years. Develop a 10-year pro forma. (a) Use the pro forma to determine the before-tax IRR (BTIRR) and after-tax IRR (ATIRR) for each level of financing (assume monthly mortgage amortization). RE 530 Real Estate Investment and Finance Problem Set 2: Financing An investor would like to purchase a new apartment property that costs $2 million with an initial year NOI of $190,000, and an expected growth rate of 3% per year (in income and value). The building and improvements represent 80% of value and will be depreciated over (1 27.5 per year). Assume a 36% tax bracket for all income and capital gains taxes. The investor faces the decision of whether to use 70% or 80% financing. The 70% loan can be obtained at 10% interest for 25 years. The 80% loan can be obtained at 11% interest for 25 years. Develop a 10-year pro forma. (a) Use the pro forma to determine the before-tax IRR (BTIRR) and after-tax IRR (ATIRR) for each level of financing (assume monthly mortgage amortization)