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Assume the property cost of S 1,250,000 with a stated annual rate of 75%, 25 years with monthly prste Develop the before tax cash flow statements for the four partial statements on page 13 of the Harvard In addition, calculate the before tax cash flow return on equity and constant)and the weighted average rate of return for the four examples. The 90% debt/equity has been completed as an example. Weighted average rate of return 90L.088)+.10.2019) the return on debt ( mortgage Debt/equity Gross Revenues -vacancy & Collection Cost (10 Net Revenues -operating expenses Free and Clear Cash Flow (NOI) -Debt Service Before Tax Cash Flow 90% 270000 27000 243000 118000 125000 99764 25236 80% 70% 60% Return on Equity 25236/125000 20.19% *F51 cute gasser used tt Return on Debt 99764/1125000 (Mortgage constant ) leatいfutuen 8.87% duut) Equity 125000 1000000 375000 500000 Debt 90% mortgage 80% mortgage 70% mortgage 60% mortgage 1125000 875000 750000
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Answer #1

Calculate the WACC as follows:

1 Total capital 2 Debt 3 Equity 4 Debt/Equity 5 Gross revenues 6 Vacancy & collection cost 7 Net revenues 8 Operating expenses 9 Free and clear cash flow(NOI) $125,000.00$125,000.00S125,000.00S125,000.00 10 Debt service 11 Before tax cash flow 12 13 Return on equity 14 Return on debt 15 Debt weight 16 Equity weight 17 WACC $1,250,000.00 $1,250,000.00 $1,250,000.00 S1,250,000.00 $1,125,000.00 $1,000,000.00$875,000.00$750,000.00 $125,000.00 $250,000.00 S375,000.00 S500,000.00 60% $270,000.00 $270,000.00$270,000.00$270,000.00 S27,000.00$27,000.00 $27,000.00 S27,000.00 $243,000.00 S243,000.00 $243,000.00 $243,000.00 S118,000.00S118,000.00S118,000.00S118,000.00 90% 80% 70% S99,763.81$88,678.94S77,594.07S66,509.21 S25,236.19S36,321.06$47,405.93S58,490.79 20.19% 8.87% 9000 10% 0.10 14.53% 8.87% 80% 20% 0.10 12.64% 8.87% 7000 30% 0.10 11 .7000 8.87% 60% 40% 0.10

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Formulas:

1250000 1 Total capital 2 Debt 3 Equit 4 Debt/E 5 Gross revenues 6 Vacancy & collection cost 7 Net revenues 1250000 -Bl B4 -B1-B2 0.9 270000 1250000 1250000 -C1-C2 0.8 270000 DI *D4 -D1-D2 0.7 270000 El E4 -E1-E2 0.6 270000 B5*10% C5* 1 090 E5*10% Ds* 1 0% -D5-D6 118000 -D7-D8 PMT 7.5% 12,25*12-D2 012 -D9-D10 -B5-B6 118000 9 Free and clear cash flow(NOI) B7-B8 118000 C7-C8 E5-E6 118000 -E7-E8 erating expenses 10 Debt service PMT 7.5% 12.25* 12.-B2) -B9-Bl0 12 PM -C9-Ci10 7.59 12.25치2. 2) 12 PM (759 12.25치2 -E2 * 12 11 Before tax cash flow 12 13 Return on equit 14 Return on debt 15 Debt weight 16 Equity weight 17 WACC -E9-El0 -C11/C3 -C10/C2 -C4 -1-C15 D11/D3 -D10/D2 -B 1 1 /B3 -B10/B2 -B4 -1-B15 E11/E3 -E10/E2 E4 -1-E15 D4 -1-D15 14 B15 13 B16 C14*C15)t(C13*C16 D14*D1 D13*D16 14 E15)+(E13 E16

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