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n investor would like to purchase a new apartment property for $2.2 million. However, she faces the decision of whether to use 70 percent or 80 percent financing. The 70 ercent loan can bebtained at 4 percent interest for 20 years. The 80 percent loan can be obtained at 5 percent interest for 20 years.NOI is expected to be $150,000 per year nd increase at 2 percent annually, the same rate at which the property is expected to increase in value. The building and improvements represent 80 percent of value and will be depreciated over 39 years (1:39 per year) with no mid-month convention for year 1. The project is expected to be sold after five years. Assume a 35 percent tax racket for ordinary income, a 25 percent for depreciation recapture, and 20 percent for capital gains taxes.Required:a. What would the BTIRR and ATIRR be at each level of nancing (assume monthly mortgage amortization) ? b. What is the break-even interest rate (BEIR) for this project? Solve the whole question

n investor would like to purchase a new apartment property for $2.2 million. However, she faces the decision of whether to use 70 percent or 80 percent financing. The 70 ercent loan can bebtained at 4 percent interest for 20 years. The 80 percent loan can be obtained at 5 percent interest for 20 years.NOI is expected to be $150,000 per year nd increase at 2 percent annually, the same rate at which the property is expected to increase in value. The building and improvements represent 80 percent of value and will be depreciated over 39 years (1:39 per year) with no mid-month convention for year 1. The project is expected to be sold after five years. Assume a 35 percent tax racket for ordinary income, a 25 percent for depreciation recapture, and 20 percent for capital gains taxes.Required:a. What would the BTIRR and ATIRR be at each level of nancing (assume monthly mortgage amortization) ? b. What is the break-even interest rate (BEIR) for this project? Solve the whole question

Algebra and Trigonometry (6th Edition)
Algebra and Trigonometry (6th Edition)
6th Edition
ISBN:9780134463216
Author:Robert F. Blitzer
Publisher:Robert F. Blitzer
ChapterP: Prerequisites: Fundamental Concepts Of Algebra
Section: Chapter Questions
Problem 1MCCP: In Exercises 1-25, simplify the given expression or perform the indicated operation (and simplify,...
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An investor would like to purchase a new apartment property for $2.2 million. However, she faces the decision of whether to use 70 percent or 80 percent financing. The 70 percent loan can bebtained at 4 percent interest for 20 years. The 80 percent loan can be obtained at 5 percent interest for 20 years. NOI is expected to be $150,000 per year and increase at 2 percent annually, the same rate at which the property is expected to increase in value. The building and improvements represent 80 percent of value and will be depreciated over 39 years (1 -: 39 per year) with no mid-month convention for year 1. The project is expected to be sold after five years. Assume a 35 percent tax bracket for ordinary income, a 25 percent for depreciation recapture, and 20 percent for capital gains taxes. Required:a. What would the BTIRR and ATIRR be at each level of financing (assume monthly mortgage amortization)? b. What is the break - even interest rate (BEIR) for this project? Solve the whole question
Transcribed Image Text:An investor would like to purchase a new apartment property for $2.2 million. However, she faces the decision of whether to use 70 percent or 80 percent financing. The 70 percent loan can bebtained at 4 percent interest for 20 years. The 80 percent loan can be obtained at 5 percent interest for 20 years. NOI is expected to be $150,000 per year and increase at 2 percent annually, the same rate at which the property is expected to increase in value. The building and improvements represent 80 percent of value and will be depreciated over 39 years (1 -: 39 per year) with no mid-month convention for year 1. The project is expected to be sold after five years. Assume a 35 percent tax bracket for ordinary income, a 25 percent for depreciation recapture, and 20 percent for capital gains taxes. Required:a. What would the BTIRR and ATIRR be at each level of financing (assume monthly mortgage amortization)? b. What is the break - even interest rate (BEIR) for this project? Solve the whole question
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