Tandem Properties acquired a retail property five years ago it the cost of $300,000. Plaza Mondawin was not a newly built retail center at the time of purchase, The purchase was finaneed with a 75% mortgage made at 10% interest for 25 years. Tandem uses straight-line depreciation, where 80% of the purchase price was allocated to the building and 20% allocated to land. When purchased initially, Plaza Mondawin could be depreciated on a straight-line basis over a depreciable life of 27 years. Tandem has had a marginal tax rate of 50% over the past five years. (note: loan payments and interest acerual are amortizing monthly, but remember to represent them in your Excel sheet on an annual basis) The comparable historical data indicates that property values in the region would be increasing at a rate of 3% per year for the holding period of 5 years. If Plaza Mondawin were sold at the end of year 5 , a selling cost equal to 6% of the sale price would have to be paid. The capital gain from the sale of the property would have been taxed at a rate of 28%. 1) [7 points] Calculate how much Tandem would have received from the proceeds of the sale were Plaza Mondawin sold today. [make sure your answer is shown in cell Y20] 2) [8 points] Calculate the rate of return that Tandem would have realized for the holding period of five years if the property were sold, before and after tax. [make sure your answers are shown in cell AB10 and AB11] 3) [5 points] What is the interest portion of the debt payment in year 3 ? [make sure your answer is shown in cell P9] 4) [5 points] What is the adjusted basis for the property if sold in year 5 ? [make sure your answer is shown in cell X16 ] Tandem Properties acquired a retail property five years ago it the cost of $300,000. Plaza Mondawin was not a newly built retail center at the time of purchase, The purchase was finaneed with a 75% mortgage made at 10% interest for 25 years. Tandem uses straight-line depreciation, where 80% of the purchase price was allocated to the building and 20% allocated to land. When purchased initially, Plaza Mondawin could be depreciated on a straight-line basis over a depreciable life of 27 years. Tandem has had a marginal tax rate of 50% over the past five years. (note: loan payments and interest acerual are amortizing monthly, but remember to represent them in your Excel sheet on an annual basis) The comparable historical data indicates that property values in the region would be increasing at a rate of 3% per year for the holding period of 5 years. If Plaza Mondawin were sold at the end of year 5 , a selling cost equal to 6% of the sale price would have to be paid. The capital gain from the sale of the property would have been taxed at a rate of 28%. 1) [7 points] Calculate how much Tandem would have received from the proceeds of the sale were Plaza Mondawin sold today. [make sure your answer is shown in cell Y20] 2) [8 points] Calculate the rate of return that Tandem would have realized for the holding period of five years if the property were sold, before and after tax. [make sure your answers are shown in cell AB10 and AB11] 3) [5 points] What is the interest portion of the debt payment in year 3 ? [make sure your answer is shown in cell P9] 4) [5 points] What is the adjusted basis for the property if sold in year 5 ? [make sure your answer is shown in cell X16 ]
