Question

The NOI is $40,000; there are $5,000 in tenant improvement expenditures paid for by the landlord; there is a $200,000 interest-only loan at 8 percent annual interest; the depreciable cost basis of this residential property is $300,000; the owner's tax bracket is 33 percent. What is the Equity After-Tax Cash Flow (EATCF)?

Answer 1

Answer:

cash flow after taxes: 311,080

Explanation:

first we calculate the net income:

net operating income     40,000

interest expense:

200,000 x 8% =              (16,000)

earnings before taxes:    24,000

income tax: 33%               (7,920)

net income                       16,080

then, we adjust for the non-monetary expenses in the income statement, which in this case; is depreication

+ depreciation expense: 300,000

and subtract the capital expenditures (CAPEX)

less CAPEX                        (5,000)

CASH FLOW AFTER TAX: 311,080