The following 5 questions are based on this situation: Suppose you are considering the acquisition of a hotel that is currently trading at $ 67 million. The current return on such investments on the market is estimated at 10%. The investors required rate of return is of 11%. The asset's (annual) NOI for the next 5 years [i.e. the current lease term) is $ 6,000,000. At the end of the current lease, you expect the NOI to increase to $ 6,500,000 for the foreseeable future. You anticipate selling the property five years from today. The building to land value ratio is 3:1 and the depreciable life of the property is 39 years. You contacted your banker who is willing to give you a LTV of 80%. The mortgage loan details are: 7.5% 30-year monthly amortizing loan. The tax rates are as follows: 22% income tax, 25% depreciation recapture tax, 20% capital gains tax. Consider straightline depreciation. The going-in Cap rate is 7%. 5 years later, 50bps additional risk premium should be applied to estimate the going-out cap rate. The cost of sales( and purchase) is 3%.

1. What is the taxable income in year 4?

2. On the basis of the data provided, what is the overall gain during the sale of the property?

3. On the basis of the data provided, how much (in $) is the capital gain tax?

4. On the basis of the data provided, calculate your IRR based on BTCF.

5. On the basis of the data provided, calculate your IRR based on ATCF.

Would like to have the calculations in order to support my learning process.