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)?
A) $14,680
B) $27,800
C) $30,680
D) $35,000

Question

Quizplus · Accepted Answer

The correct answer is A.The EATCF is calculated as follows:NOI = $40,000Tenant improvement expenditures = $5,000Interest expense = $200,000 * 8% = $16,000Depreciation = $300,000 / 27.5 years = $10,909Taxable income = $40,000 - $16,000 - $10,909 = $13,091Taxes = $13,091 * 33% = $4,320EATCF = $40,000 - $16,000 - $10,909 - $4,320 = $14,680

The NOI Is $40,000; There Are $5,000 in Tenant Improvement