An investor purchased an auto body shop for $200,000 using a mortgageof 70 percent of the purchase price. The loan terms were: 6 percentinterest rate, 25-year amortization period, 10-year term, 12 payments peryear, and loan costs of 2 percent of loan amount. The buyer incurredacquisition costs of $8,000. At the time of purchase the original basis wasallocated 75 percent for improvements and 25 percent for land. Theprojected NOI for year one is $25,000.This investor's marginal tax rate is 28 percent, so what is the cash flowafter tax for year one of the projection?O $10,662O $11,109O $12,549O $14,176

To calculate the cash flow after tax for year one, follow these steps:Calculate the loan amount -…

Answered: An investor purchased an auto body shop…

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter3: Income Sources

Section: Chapter Questions

Problem 43P

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An investor is considering the acquisition of a “distressed property” which is on Northlake Bank’s REO list. The property is available for $203,400 and the investor estimates that he can borrow $160,000 at 4.5 percent interest and that the property will require the following total expenditures during the next year: Inspection $ 551 Title search 1,102 Renovation 13,000 Landscaping 902 Loan interest 7,251 Insurance 1,851 Property taxes 6,051 Selling expenses 8,000 Required: a. The investor is wonderin
An appraiser is looking for comparable sales and finds a property that recently sold for $224, 000. She finds that the buyer was able to assume the seller's fully amortizing mortgage, which had monthly payments based on a 7 percent interest. The balance of the loan at the time of sale was $148, 000 with a remaining term of 15 years (monthly payments). The appraiser determines that if a $148, 000 loan was obtained on the same property, monthly payments at the market rate for a 15-year fully amortizing loan would have been 8 percent with no points. Required: a. Assume that the buyer is expected to benefit from the interest savings on the assumable loan for the entire loan term. What is the cash equivalent value of the property? b. What is the cash equivalent value of the property if you assumed that the buyer is only expected to benefit from interest savings for five years because he would probably sell or refinance after five years? Use excel spreadsheet to show work and provideanswer.
An appraiser is looking for comparable sales and finds a property that recently sold for $200,000. She finds that the buyer was able to assume the seller’s fully amortizing mortgage which had monthly payments based on a 7 percent interest rate. The balance of the loan at the time of sale was $140,000 with a remaining term of 15 years (monthly payments). Theappraiser determines that if a $140,000 loan was obtained on the same property, monthly payments at the market rate for a 15-year fully amortizing loan would have been 8 percent with no points.a. Assume that the buyer expected to benefit from the interest savings on the assumable loan for the entire loan term. What is the cash equivalent value of the property?b. How would your answer to part (a) change if you assumed that the buyer only expected to benefit from interest savings for five years because he would probably sell or refinance after five years?
You have entered into an agreement for the purchase of land. The agreement specifies that you will take ownership of the land immediately. You have agreed to pay $51, 000 today and another $51,000 in three years. Calculate the total cost of the land today, assuming a discount rate of (a) 2%, (b) 4%, or (c) 6%.
We acquired a property for $10,000,000 including all fees. We financed its purchase with a $7,000,000 loan that carried an annual interest rate of 5.2%, an amortization period of 25 years and a 5-year term. NOI for year 1 was $1,200,000; year 2 was $1,300,000, and for year 3 NOI was $1,400,000. All cash flow after debt service was paid to the equity investors as distributions at the end of every year. We sold this property at the end of year 3 for $11,000,000 net of all disposition fees. Identify the pre-tax annual cash flows to the equity investors and determine the pre-tax IRR to the equity investors for this investment.
You have entered into an agreement for the purchase of land. The agreement specifies that you will take ownership of the land immediately. You have agreed to pay $35,000 today and another $35,000 in three years. Calculate the total cost of the land today, assuming a discount rate of (a) 3%, (b) 5%, or (c) 7%. (FV of $1. PV of $1. FVA of $1, and PVA of $1) (Use tables, Excel, or a financial calculator. Round your answers to 2 decimal places.) a. b. C Payment Amount $ 35,000 35,000 35,000 Interest Rate 3% 5% 7% Compounding Annually Annually Annually Period Due 3 years 3 years 3 years Total Cost of Land Today
A property is purchased for $81,000. The purchase is financed with a GPM carrying a 12 percent interest rate. A 7.6 percent rate of graduation will be applied to monthly payments beginning each year after the loan is originated for a period of five years. The initial loan amount is $72,900 for a term of 30 years. The homeowner expects to sell the property after seven years. Required: a. If the initial monthly payment is $576.91, what will the payments be at the beginning of years 2, 3, 4, and 5? b. What would the payment be if a CPM loan was available? c. Assume the loan is originated with two discount points. What is the effective yield on the GPM?
Consider an income property that is under evaluation for purchase with a $489,398 loan, 3.3% interest rate, compounded annually, amortized over 29 years. The NOI at the end of year 1 is $48,148, year 2 is $54,192, and year 3 is 55,470. At the end of year 3, the property is estimated to sell for $525,700. Discount the equity cash flows over the 3-year holding period at 6.0 percent. Using the principles of mortgage equity capitalization, what is the estimated total property value with a holding period of 3 years? Please post step by step solve.
Short Company purchased land by paying $11,000 cash on the purchase date and agreed to pay $11,000 for each of the next six years beginning one-year from the purchase date. Short's incremental borrowing rate is 7%. The land reported on the balance sheet is closest to: (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided.) Multiple Cholce $77,000. $63.432. $66,000. $43,979.
A property can be purchased in cash by $570000 or through an equivalent plan that consists of a down payment of 10% of this amount, plus six monthly installments of $ 2,000.00 paid directly to the construction company, which works with monthly interest of 3.00%, after which the debit balance is financed by a financial agent in 20 years, at the rate of 0.80% p.m., with semiannual payments of $5,000.00 simultaneously with equal monthly installments, with no grace period. Determine the amount of each monthly installment to be paid to the financial agent.
A property was purchased for $5321.00 down and payments of $926.00 at the end of every six months for 4 years. Interest is 3% per annum compounded monthly. What was the purchase price of the property? How much is the cost of financing? The purchase price of the property was $ (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.) The cost of financing is $ (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)
Rachel Corporation purchased a building by paying $91,500 cash on the purchase date, agreeing to pay $50,300 every year for the next nine years and one payment of $101,500 ten years from the purchase date. The first payment is due one year after the purchase date. Rachel's incremental borrowing rate is 10%. (FV of $1, PV of $1, FVA of $1, and PVA of $1) The building reported on the balance sheet as of the purchase date is closest to: Note: Use the appropriate factor(s) from the tables provided.

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