Reference no: EM133285569

Listing price 5,000,000

Building value at purchase is 75% of the price. 25% represents land value.

40 year straight light depreciation schedule.

Income tax rate of 25%.

Purchase is financed by and interest only loan with interest rate of 7% and loan to value ration of 75%. NOI in the first year after purchase is $300,000. NOI expected to grow 6% each year.

Expect to hold the property for 2 years, after the selling price is $5,500,000.

Selling cost is 8% of the price.

Capital gains rate is half of your income tax of 12.5%.

1. Calculate the after tax cash flows from operation for the next two years.

2. Cal air the after tax cash flows from sales at the end of the 2 year holding f period.

3. Calculate the internal rate of return from investing in this property.