the asking price for the property is $1,000,000. rents are estimated at $200,000 during the first year and are expected to grow at 5% per year. Vacancies and collection losses are expected to be 10% of rents. Operating expenses will be 35% of effective gross income . Capital expenditure will be 5% of effective gross income. A 30 year fixed rate loan for 70% of the purchase price can be obtained at 10% interest rate. The property is expected to appreciate in value at 3%per year and is expected to be owned for 7 years and then sold

The investors tell you he would also like to know how tax consideration affect your investment analysis. you determine that the building represent 90% of value and would be depreciated over 27.5 years . The potential investor indicates that he is in the 25% tax bracket . Capital gain tax rate is 20% while depreciation recapture tax rate is 25%.

a? write down the cash flows pro forma for year 1 to year 7.

b) what is the investors expected before tax internal rate of return in equity invested (BTIRR) ? show your work!!

c) what is the investors expected after tax internal rate of return on equity invested (ATIRR) ? show your work!!!!