The following information related to a real estate asset investment that is fully financed using REITS equity Project costs: Land. Ksh 300000 Buildings. Ksh 2500000 Total costs. Ksh 2800000 Operating data: Initial rent Ksh 522100 Growth in rent. 8% per year Vacancy rate. 6% of gross rent Other income. 1% of gross rent Operating expenses. 16% of gross rent for one year Growth in expenses. 7% per year Growth in resale price. 6% Selling expenses. 5% of resale price Depreciation (straight line 27.5 years, mid-month convention Put at service at beginning of the year) Holding period. 5 years Marginal tax rate. 30% Capital gains tax rate. 15% Depreciation recovery tax rate. 25% Estimated sale price. Ksh 3747032 Selling expenses. Ksh 187352 Required: a). Operating cash flows for the first 5 years b). After tax cash flows from the sale of property c). Net present value assuming cost of capital of 15% d). What are the factors that will be considered before investing in the asset
The following information related to a real estate asset investment that is fully financed using REITS equity
Project costs:
Land. Ksh 300000
Buildings. Ksh 2500000
Total costs. Ksh 2800000
Operating data:
Initial rent Ksh 522100
Growth in rent. 8% per year
Vacancy rate. 6% of gross rent
Other income. 1% of gross rent
Operating expenses. 16% of gross rent for one year
Growth in expenses. 7% per year
Growth in resale price. 6%
Selling expenses. 5% of resale price
Depreciation (straight line 27.5 years, mid-month convention
Put at service at beginning of the year)
Holding period. 5 years
Marginal tax rate. 30%
Depreciation recovery tax rate. 25%
Estimated sale price. Ksh 3747032
Selling expenses. Ksh 187352
Required:
a). Operating cash flows for the first 5 years
b). After tax cash flows from the sale of property
c).
d). What are the factors that will be considered before investing in the asset
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