Suppose you are evaluating an investment opportunity in an office building for which you have estimated the following financial characteristics: First year net operating income (NOI) = $75,000. Growth rate in net operating income = 5 percent per year. Tax depreciation = $10,000 per year. Annual interest expense = $9,000. Annual total debt service expense = $12,000. Equity investors marginal income tax rate = 36 percent. Investment horizon = four years. The cash flows after taxes for years one and four are closest to: A) CFAT1 = $51,480 and CFAT4 = $50,766. B) CFAT1 = $42,840 and CFAT4 = $50,406. C) CFAT1 = $40,600 and CFAT4 = $47,693. D) CFAT = $42,840 and CFAT4 = $47,760. How to calc CFAT4 real quick after having CAFT1???
Answer is B I think? And, no theres not really a quick way to get there because almost all of the numbers except for the NOI and taxes payable are constant. Although you dont need to worry about Year 2 and 3.
B. No short cut except you don’t have to calc Y2 and Y3, you can just increment NOI and go from there. T/G
Can someone show me the calcs, I feel like a retard, but I’m apparently doing something wrong.
CFAT(1)= 75000-12000(debt service)- 20160(taxes payable) Taxes Payable(1)= [75000-10000(dep)-9000(int)]*.36 CFAT(4)= 86821-12000(debt service)- 24415(taxes payable) Taxes Payable(4)=86821-10000-9000]*.36
Its like 30 extra seconds, if that, if you are quick. Anyways, this problem you only need to calculate one (CFAT4 since they are all different).
i was calc for year 2 and 3 and got frustrated…