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to decide if the new office leasing are estimated in the s will remain level oyer a 10-yea 24. A company is planning to move to a larger office and is trying should be owned or leased. Cash flows for owning versus following chart. Assume that the cash flows from operation holding period. If purchased,t remainder with a nd finance the 5% interest-only loan that has a balloon payment due in year to from sale of the property at the end of year 10 is expected to be he company will invest $325,000 in equity a $850,000 Own Lease Sales 1,000,000 1,000,000 Cost of goods sold 500,000 500,000 Gross income Operating expenses: 130,000 60,000 130,000 60,000 120,000 Business Real estate Lease payments 190,000 310,000 Total operating expenses 190,000 NOI Mortgage Interest Depreciation Taxable income Tax 100,000 45,000 165,000 49,500 57,000 After tax net income 115,500 133,000

1) What is the incremental annual after-tax Cash Flow earned from owning leasing ?

2) Assuming at the end of year 10 the buyer of the building determinate they could landlord, attract a new tenant, lease the building and obtain the following NOI:

Rent 250,000
Operating Expenses 75,000
Real Estate taxes 40,000

NOI 135,000

What is the implied cap rate if the building is sold for $2,250,000?

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