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so I am familiar with this stuff but I think the excess info in question is confusing me. please help me fill out this chart
so I am familiar with this stuff but I think the excess info in question is confusing me. please help me fill out this chart
You have a $1000 to invest with a 10-year horizon and are comparing investing in a 10-year bond (that has equal risk to the real estate considerations), and unlevered and levered real estate. The bond pays 8% annual coupon. Your buildings provide an NOI of $80 and you expect to buy and sell your buildings for $1000, with no acquisition or selling expense. You are in a 43.4% marginal tax bracket, with a 28.8% depreciation recapture rate and a 23.8% capital gains tax rate. You can take a 30-year straight line depreciation on the buildings (valued at $800 each) and not depreciate the $200 land value. You can get bullet loans for 75% LTV at 5% for 10 years. No PALLs are allowed. Complete the following table of cash flows that will provide the IRR noted. Summarize you computations in appended table. Answer the noted questions after completing you computations. Bond Pre Tax Post Tax Unlevered Bldg Pre Tax Post Tax -1000 4 Levered Bldgs PreTax Post Tax -1000 -1000 0 1 2 3 4 5 6 7 8 9 10 4.5% 8.0% 5.1 % 17% 12.5% IRR 8.0% Sum of AT CF's You have a $1000 to invest with a 10-year horizon and are comparing investing in a 10-year bond (that has equal risk to the real estate considerations), and unlevered and levered real estate. The bond pays 8% annual coupon. Your buildings provide an NOI of $80 and you expect to buy and sell your buildings for $1000, with no acquisition or selling expense. You are in a 43.4% marginal tax bracket, with a 28.8% depreciation recapture rate and a 23.8% capital gains tax rate. You can take a 30-year straight line depreciation on the buildings (valued at $800 each) and not depreciate the $200 land value. You can get bullet loans for 75% LTV at 5% for 10 years. No PALLs are allowed. Complete the following table of cash flows that will provide the IRR noted. Summarize you computations in appended table. Answer the noted questions after completing you computations. Bond Pre Tax Post Tax Unlevered Bldg Pre Tax Post Tax -1000 4 Levered Bldgs PreTax Post Tax -1000 -1000 0 1 2 3 4 5 6 7 8 9 10 4.5% 8.0% 5.1 % 17% 12.5% IRR 8.0% Sum of AT CF'sStep by Step Solution
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