Reference no: EM132658407
Question a) Calculate the CCA schedule for a property over a five-year holding period under the following assumptions:
Original Purchase Price: $3,150,000
Land Cost: $250,000
Cap Ex: $12,000 per year commencing in year 2
CCA Rate (Class 1): 4% of declining balance(1)
(1) for simplicity, assume only one CCA class applies
Note: half-year rule applies in Year 1
final-year rule applies in Year 5
assume that full 4% CCA is taken on cap ex in the year incurred (i.e. half year rule does not apply to cap ex)
Question b) For the same property as in a) above, estimate the Equity Cash Flow from Operations after Taxes in the first year of ownership under the following additional assumptions:
Net Operating Income: $282,000
Loan amount: $2,350,000
Terms: 6.20% per year, compounded semi-annually, 25 year amortization
Income tax rate: 45%
Note: Assume no Capex, tenant allowances or leasing commissions during the first year.
Question c) Calculate the Levered After Tax reversion (sale proceeds) assuming the property is sold at the end of the 5th year with the following assumptions:
Sale Price: $4,300,000
Selling Costs: 5%
Land allocation: $430,000
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