What is the npv on this investment

Assignment Help Financial Accounting

Reference no: EM133560960

1. In order to answer all questions you need to read the financial information for the garden courts apartment
complex that is uploaded to Canvas.

2. We recommend this loan calculator and then you can set the payment as annual and compounded annually.
3. Only interest can be expensed from the income statement (not principal).

4. Feel free to state/address your assumptions clearly with your answers, if necessary.

Problem One: Prepare an Income statement for one year of business based on the information provided, feel free to round numbers, but do not consider depreciation in this part.

Problem Two: You purchased the property for 7 times the gross rental revenues. You make a down payment of 50% and the balance money is financed on a 5 year interest only loan at an interest rate of 5%. Prepare an income statement for the first year of ownership, using a simple interest formula. Note when paying interest only loans there is no principal payment. You will owe the original loan amount of money at the end of 5 years.Problem Three: Your personal individual tax rate is 35% of any profit that the building generates. Looking at year 1, Did you make a profit? If so, how much did you pay in taxes? Now let's consider depreciation. The building can be depreciated at 1/30 the purchase price each year. What is your new tax liability in year 1 with the depreciation expensed? How does this affect the balance sheet?

Problem four: Extra Credit After two years you sell the building for 6% more than the purchase price. What is the NPV on this investment? Depreciation was used in the 2 years and there is a capital gains tax of 30%

Reference no: EM133560960

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