example question page 260, book 5

net cash flow for real estate investment I can unersatnd year 1 cash flow, but don’t know where year 2, and year 3 cash flow are from? how did they calculate them? also why the cash flow = after tax net income + depreciation - principle portion of mortgage payment? I can understand adding back deprecaiton, but why principle has to be deducted?

Principal repayment is the CFF portion of the Cashflow. AT Net Income - Depreciation = CFO Principal Repayment = CFF (outflow). Total Cash flow = CFO + CFF (both terms with Sign included). Does that make sense? CP

mmm…I am not sure…interest repayment is CFO then? principle repayment is CFF? if those true…then it makes sense…

that is the way of the world under US GAAP. CP

I totally forgot that part…so much to review again…*sign thanks much!