Question
You are an employee of a consultant company and have been given the following information to do an investment analysis of a new small incomeproducing
You are an employee of a consultant company and have been given the following information to do an investment analysis of a new small incomeproducing property for sale to a potential investor. What is the investors after tax IRR? (round your final answer to 2 decimals)
| Asking Price | $2,000,000 |
|
| Rent Year 1 | $300,000 |
|
| Growth Rent | 3% |
|
| Vacancy and Coll Loss | 10% | of rents |
| Expenses | 30% | of EGI |
| Appreciation Rate | 3% |
|
| Tax Considerations |
|
|
| Building Value | $1,800,000 |
|
| Depreciation | 39 | years |
| Ordinary Income Tax Rate | 35% |
|
| Capital Gains Tax Rate | 20% |
|
| Depreciation Recapture Tax Rate | 25% |
|
| LTV | 70% |
|
| Loan Interest | 4% |
|
| Loan Term | 30 | years |
| Payments Per Year | 12 |
|
| Holding Period | 3 | years |
| Selling Costs | 0% | of sale price |
| Equity Discount Rate | 14% |
|
| After Tax Equity Discount Rate | 10% |
|
The above information results in the following investment analysis.
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Fintech For Finance Professionals
Authors: David Kuo Chuen Lee, Joseph Lim, Kok Fai Phoon, Yu Wang
1st Edition
9811241864, 978-9811241864
