An investor is under contract to buy a 2,000,000 square foot fully leased industrial park in Charleston, South Carolina as an investment at a price of $60,000,000. There are 12 tenants, each of which has a fifteen-year lease at a flat rental rate of $0.25 per square foot per month with an expense stop of $0.05 per square foot per month. Total annual operating expenses for the building are currently $1.20 per square foot per year. There is a ten-year interest-only mortgage loan with a principal balance of $40,000,000 at a 4.5% fixed annual interest rate that has six years remaining until the maturity date. The building/land ratio for tax depreciation purposes is 75/25. What is the annual tax depreciation? a.$1,636,362 b.$1,538,462 c.$384,616 d.$1,153,846
An investor is under contract to buy a 2,000,000 square foot fully leased industrial park in Charleston, South Carolina as an investment at a price of $60,000,000. There are 12 tenants, each of which has a fifteen-year lease at a flat rental rate of $0.25 per square foot per month with an expense stop of $0.05 per square foot per month. Total annual operating expenses for the building are currently $1.20 per square foot per year. There is a ten-year interest-only mortgage loan with a principal balance of $40,000,000 at a 4.5% fixed annual interest rate that has six years remaining until the maturity date. The building/land ratio for tax depreciation purposes is 75/25. What is the annual tax depreciation? a.$1,636,362 b.$1,538,462 c.$384,616 d.$1,153,846
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 18P
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An investor is under contract to buy a 2,000,000 square foot fully leased industrial park in Charleston, South Carolina as an investment at a price of $60,000,000. There are 12 tenants, each of which has a fifteen-year lease at a flat rental rate of $0.25 per square foot per month with an expense stop of $0.05 per square foot per month. Total annual operating expenses for the building are currently $1.20 per square foot per year. There is a ten-year interest-only mortgage loan with a principal balance of $40,000,000 at a 4.5% fixed annual interest rate that has six years remaining until the maturity date. The building/land ratio for tax depreciation purposes is 75/25. What is the annual tax depreciation?
a.$1,636,362
b.$1,538,462
c.$384,616
d.$1,153,846
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