Use the information below for the question:
Potential Gross Income: $280,000
Selling Expenses = 3% of sale price
Operating Expenses = $155,000
Vacancy and rent loss = 5% of Potential Gross Rent
Additional Misc. Income = $4,000
Capital expenditures = $8,000
Current price = $1,380,000
Price is expected to appreciate at 6% per year
Average tax rate= 22%
Marginal Tax Rate = 30%
Project Discount Rate = 10%
Levered Discount Rate = 12%
After Tax Discount Rate = 8.4%
Loan: 75% LTV, 30 Years Annual Payments, 5% Interest, no points or other costs
3 year holding period
What is the NOI for year 1?
What is the before tax equity reversion?
What is the appropriate discount rate when using Before Tax Cash Flows? (Answer is a percentage from the problem)
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