Remember: Do all your calculations in Excel, and submit the final spreadsheet with all your work. Each cell must contain the correct formula in order for you to get credit. Financial calculators are not acceptable. You acquired a multifamily residential property 10 years ago for $14 million. At the time of acquisition, the land value was $2.1 million. 1. How much was your annual depreciation expense? When you purchased the property, you were able to lever your investment with a ratio of 4.5. The bank gave you a fixed-rate, zero-amortizing mortgage with an interest rate of 5.6%. 2. How much was your monthly interest payment? This year, the property earns an NOI of $1,200,000. This is the only income that you personally earn throughout the year. You pay taxes based on the post-2017 rates and tax brackets, which are described in the PowerPoint slides in the Week 6 folder on Blackboard. 3. How much do you pay in ordinary income taxes this year? Each year, you set aside $100,000 in capital reserves. Before you sell the property, you spend all this money on capital improvements. After these renovations, you're able to sell it for $20 million. You will have to pay 4% of the sale price in selling expenses. 4. How much is the adjusted basis of the property? JL Your capital gains tax rate is 15%, and your depreciation recapture tax rate is 25%. 5. How much do you owe in capital gains taxes? + 6. How much do you owe in depreciation recapture taxes? 7. Please complete the pro forma from NOI down to EATCF in this final year of ownership, using th cash flow accounting approach we discussed in class. Remember to include both operating cash flow and reversion cash flow. Remember: Do all your calculations in Excel, and submit the final spreadsheet with all your work. Each cell must contain the correct formula in order for you to get credit. Financial calculators are not acceptable. You acquired a multifamily residential property 10 years ago for $14 million. At the time of acquisition, the land value was $2.1 million. 1. How much was your annual depreciation expense? When you purchased the property, you were able to lever your investment with a ratio of 4.5. The bank gave you a fixed-rate, zero-amortizing mortgage with an interest rate of 5.6%. 2. How much was your monthly interest payment? This year, the property earns an NOI of $1,200,000. This is the only income that you personally earn throughout the year. You pay taxes based on the post-2017 rates and tax brackets, which are described in the PowerPoint slides in the Week 6 folder on Blackboard. 3. How much do you pay in ordinary income taxes this year? Each year, you set aside $100,000 in capital reserves. Before you sell the property, you spend all this money on capital improvements. After these renovations, you're able to sell it for $20 million. You will have to pay 4% of the sale price in selling expenses. 4. How much is the adjusted basis of the property? JL Your capital gains tax rate is 15%, and your depreciation recapture tax rate is 25%. 5. How much do you owe in capital gains taxes? + 6. How much do you owe in depreciation recapture taxes? 7. Please complete the pro forma from NOI down to EATCF in this final year of ownership, using th cash flow accounting approach we discussed in class. Remember to include both operating cash flow and reversion cash flow
