You bought a piece of land at $1,500,000. You plan to build a 45,000 square foot...

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You bought a piece of land at $1,500,000. You plan to build a 45,000 square foot building at cost of $150 per square foot, al

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Answer 1

Answer #1

Price of land		$1,500,000		Rent per square foot		$2
Area of Building (square foot)		45,000		Total rent per month		$1,080,000
Cost per square foot		$150		% increase in per year for rent		4%
Total cost of building		$6,750,000		Operating expense per square foot		$0.40
Depreciaion of building per year		$173,076.92		Total operating expense		$216,000.00
property value after 10 years(1/39 th of total cost of building		$10,500,000		% increase in per year for operating expense		3%
Tax rate		35%		Capital gain tax rate		20%
Discount rate		8%


Cash Flow						Year
Items	0	1	2	3	4	5	6	7	8	9	10
Revenue	0	$1,080,000.00	$1,123,200.00	$1,168,128.00	$1,214,853.12	$1,263,447.24	$1,313,985.13	$1,366,544.54	$1,421,206.32	$1,478,054.57	$1,537,176.76
Operating Expense	0	$216,000.00	$222,480.00	$229,154.40	$236,029.03	$243,109.90	$250,403.20	$257,915.30	$265,652.75	$273,622.34	$281,831.01
EBITDA	0	$864,000.00	$900,720.00	$938,973.60	$978,824.09	$1,020,337.34	$1,063,581.93	$1,108,629.24	$1,155,553.57	$1,204,432.24	$1,255,345.75
Depreciation	0	$173,076.92	$173,076.92	$173,076.92	$173,076.92	$173,076.92	$173,076.92	$173,076.92	$173,076.92	$173,076.92	$173,076.92
Taxable income	0	$690,923.08	$727,643.08	$765,896.68	$805,747.16	$847,260.42	$890,505.01	$935,552.32	$982,476.64	$1,031,355.31	$1,082,268.83
Tax @35% rate	0	$241,823.08	$254,675.08	$268,063.84	$282,011.51	$296,541.15	$311,676.75	$327,443.31	$343,866.83	$360,974.36	$378,794.09
Net Income	0	$449,100.00	$472,968.00	$497,832.84	$523,735.66	$550,719.27	$578,828.26	$608,109.01	$638,609.82	$670,380.95	$703,474.74
Total Initial investment	$8,250,000	0	0	0	0	0	0	0	0	0	0
Income from sale	0	0		0	0	0	0	0	0	0	$10,500,000
Capital gain	0	0	0	0	0	0	0	0	0	0	$2,250,000
Capital gain tax	0	0	0	0	0	0	0	0	0	0	$450,000
Net cash flow	-$8,250,000	$622,176.92	$646,044.92	$670,909.76	$696,812.58	$723,796.20	$751,905.18	$781,185.93	$811,686.74	$843,457.88	$10,926,551.66
Discount Rate	0.08	0.08	0.08	0.08	0.08	0.08	0.08	0.08	0.08	0.08	0.08
Present Value	-$8,250,000.00	$576,089.74	$553,879.39	$532,589.80	$512,178.05	$492,603.53	$473,827.81	$455,814.49	$438,529.09	$421,938.93	$5,061,107.58
NPV											$1,268,558.41
IRR	10%

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