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A real estate investor is considering the purchase of a four-unit office building. The following information is known: The purchase price is $850,000 with an additional $7,500 in acquisition costs. The first year's rent is $2,550 per unit per month. Rents are expected to increase at a rate of 5 percent per year. Vacancy is estimated to be 8 percent of gross revenue. Operating expenses are expected to be 30 percent of EGI. Of the total cost, 80 percent is depreciable. The project can be financed with a first mortgage of $625,000 at an interest rate of 5.00 percent for 20 years, monthly payments. Financing costs (discount points, etc.) are estimated at 5 percent of the loan amount. There is a prepayment penalty of 4 percent of the outstanding balance if the loan is paid off within the first eight years of the mortgage life. The value of the investment is expected to increase at a rate of 5 percent per year. Selling expenses equal 8 percent of the selling price. The investor's holding period is two years. The investor is considered an active participant in the project and is in a 30 percent marginal tax bracket. The investor's required after-tax equity yield is 12 percent. Depreciation recovery is taxed at 25% and long-term capital gains are taxed at 20%. 3. What is the mortgage payment (total debt service) for year two? 4. What is the interest expense for year one? 5. What is the prepayment penalty amount? 6. What is the total interest expense for year two? 7. What is the amortized financing cost for year one? Hamilton 8. What is the amortized financing cost for year two? 9. What is the depreciation for year one? OR 10. What is the depreciation for year two? Sic 11. What is the expected selling price? VOTOTEL COD03 12. What is the adjusted basis? 13. What is the unpaid mortgage balance? 190E 9d os blog 14. What is the depreciation recovery? oldsisongoba 15. What is the initial equity investment? From zit e di eristys A real estate investor is considering the purchase of a four-unit office building. The following information is known: The purchase price is $850,000 with an additional $7,500 in acquisition costs. The first year's rent is $2,550 per unit per month. Rents are expected to increase at a rate of 5 percent per year. Vacancy is estimated to be 8 percent of gross revenue. Operating expenses are expected to be 30 percent of EGI. Of the total cost, 80 percent is depreciable. The project can be financed with a first mortgage of $625,000 at an interest rate of 5.00 percent for 20 years, monthly payments. Financing costs (discount points, etc.) are estimated at 5 percent of the loan amount. There is a prepayment penalty of 4 percent of the outstanding balance if the loan is paid off within the first eight years of the mortgage life. The value of the investment is expected to increase at a rate of 5 percent per year. Selling expenses equal 8 percent of the selling price. The investor's holding period is two years. The investor is considered an active participant in the project and is in a 30 percent marginal tax bracket. The investor's required after-tax equity yield is 12 percent. Depreciation recovery is taxed at 25% and long-term capital gains are taxed at 20%. 3. What is the mortgage payment (total debt service) for year two? 4. What is the interest expense for year one? 5. What is the prepayment penalty amount? 6. What is the total interest expense for year two? 7. What is the amortized financing cost for year one? Hamilton 8. What is the amortized financing cost for year two? 9. What is the depreciation for year one? OR 10. What is the depreciation for year two? Sic 11. What is the expected selling price? VOTOTEL COD03 12. What is the adjusted basis? 13. What is the unpaid mortgage balance? 190E 9d os blog 14. What is the depreciation recovery? oldsisongoba 15. What is the initial equity investment? From zit e di eristys

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