Shirly Chase, a founding partner in the firm of Dean and Howe, has a prospering professional practice. Chase has decided to investigate real estate as an estate-building mechanism and has asked you for advice concerning the property as descirbed below. You promptly arrange a consultation, at which time you obtain a retainer and determine the following facts:

A) Chase's earnings from her professional practice are sufficient to place her firmly in the 35% marginal income tax bracket (combined federal and state). She expects this situation to continue into the indefinite future.

B) Long-term capital gains are expected to be taxed at a 15% marginal tax rate

C) Chase has other investments but is in no danger of incurring liability for the alternative minimum tax.

You investigate several properties that seem to fit Chase's needs and conclude that one seems particularly well suited to her investment picture. Information on the property, an apartment building, is as follows:

* Market value (and asking price) = $2,150,000

* Next year's expected gross income = $425,000

* Next year's expected operating income = $210,000

* Building value/total property value = 0.80

* Available mortgage = $1,600,000

* Mortgage terms: 9% interest, 25-year, fully amortizing note with monthly payments and a 7-year call provision. There is no penalty for prepayment and no loan origination fee

* Operating forecast: Operating income and operating expenses alike are expected to increase at a compound annual rate of 3% for an indefinite period

* Holding period: If Chase acquires the property, she will most likely sell after 6 years and pay off balance of the mortgage note out of the sales proceeds

* The gross income multiplier, which is expected to remain constant over the transaction costs associated with disposal after 6 years (at the end of her 6th year of ownership), are expected to be about 6% of the sales price

INSTRUCTIONS: Develop a comprehensive 6-year after-tax cash-flow forecast for this property, including estimated after-tax cash from disposal.