| Year | Operating income | Tax Payable |
| 1 | $400,000 | $40,000 |
| 2 | $420,000 | $42,000 |
| 3 | $441,000 | $44,000 |
| 4 | $463,000 | $46,000 |
| 5 | $486,000 | $49,000 |
| After-tax equity reversion | $2,000,000 |
equity contribution = $1,000,000
cost for loan = 8%
loan amortization period (annual payments) = 20 (years)
Based upon the information presented in the exhibit above, the after-tax cash flow for year 2 is:
total value = $1,000,000 / (1-75%) = $4,000,000
debt = total value - equity contribution = $4,000,000 - $1,000,000 = $3,000,000
-3,000,000 PV
8 I/Y
20 N
0 FV
CPT PMT 305,556
| Year 2 | |
| Net Operating income | $420,000 |
| Less:Annual debt service | ($305,556) |
| Before-tax cash flow | $114,444 |
| Less:Tax payable | ($42,000) |
| After-tax cash flow | $72,444 |
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