Compute the after tax operating cash flow

Assignment Help Financial Management

Reference no: EM131496004

Evaluate the purchase of an existing 1000 unit apartment complex for $4,800,000. The building is assumed to have a 20 year functional life. Treat the rents as being collected at the end of each year, along with associated variable and fixed costs. Assume rent controls will prohibit the rent from being raised over the life of the building. Assume that the underlying property reverts to the original owners at the end of twenty years, and that you will also be responsible for demolition and clean-up costs, to be incurred at the end of the buildings life.

Rentals are estimated at 900 units per year

Each unit will be rented for a cumulative monthly amount of $7,000 per year

Cost per unit when rented $4,600 per year

Fixed costs $300,000 per year for the building, other than the initial investment

Demolition / clean up $3,500,000 after tax

Depreciation is to be straight-line

Assume the project can be financed at 11% (before tax) using debt

Tax rate is 35%

Develop a pro forma income statement and compute the after tax operating cash flow

A) Suppose your after-tax OCF is $1,800,000. What is the IRR?

B) What is the IRR before tax?

C) Compute the MIRR assuming the OCF’s will be reinvested to earn a rate of 15%, given a WACC of 13%

Reference no: EM131496004

Questions Cloud

What does this show about the apartheid in south africa : What does this show about Europeans after WWII? What beliefs do they still continue to hold on to?What does this show about the apartheid in South Africa?

Identify how the accounting standard are set in that country : Identify how the accounting standard are set in that country. Identify two financial reporting standards that differ from those of U.S. GAAP.

What is the value today of the cash flows : Southern California Publishing Company is trying to decide whether to revise its popular textbook, what is the value today of the cash flows?

Define the professional and collegial experiences : Choose a classmate or colleague to interview. Create 8-10 guiding questions, and try to elicit rich, relevant information based on the questions you created.

Compute the after tax operating cash flow : Develop a pro forma income statement and compute the after tax operating cash flow. What is the IRR before tax?

What impact would a jit inventory system have : Review each company's statement of cash flows to answer the following: What impact would a JIT inventory system have on each companies operating income?

Define the lacking of self-motivation : Based on the problems identified, we assumed that the problem is related to the pedagogy (learners are dependant to instructors to conduct learning).

Equivalent investment opportunities trade simultaneously : The law of one price dictates that if equivalent investment opportunities trade simultaneously in different competitive markets,

Describes a simulated community event : Compose your essay in a Word document and format it according to APA style limited to 350 words: "Use the items below to simulate organizing and hosting.

User Account

All Pages