Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. an investor would like to purchase a new apartment

An investor would like to purchase a new apartment property for $2.2 million. However, she...

80.2K

Verified Solution

Question

Accounting

image
image
image
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 be obtained 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 buliding 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. What would the BTIRR and ATIRR be at each level of financing (assume monthly mortgage amortization)? (Do not round intermediate calculations. Round your final answers to 2 decimal places.) What is the break-even interest rate (BEIR) for this project? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Chemistry
1.2K views

In a titration of a 100.0mL 1.00M NH3 solution with 1.00M HCl, what is the pH...

Finance
1.2K views

What is the advantage of RRSP over TFSA? What is the advantage of TFSA over RRSP?...

Biology
1.2K views

My pet cat is Kelly and he is a Siamese cat named my cat Kelly...

Physics
1.2K views

124 The temperature of 5 moles of a gas at constant volume is changed from...

Accounting
1.2K views