n5r0.12NOI550,000.t0.33Equity1,125,000.Purchase price4,500,000.Debt3,375,000.Costs (improvements)3,600,000.Life of assets27.5Depreciation130,909.09

Year 1Year 2Year 3Year 4Year 5

NOI550,000.00574,750.00600,613.75627,641.37655,885.23Less: Depreciation-130,909.09-130,909.09-130,909.09-130,909.09-130,909.09Less: Interest-268,981.12-266,641.07-264,106.80-261,362.18-258,389.76Taxable Income150,109.79177,199.84205,597.86235,370.10266,586.38Times: Tax Rate0.330.330.330.330.33Tax Payable49,536.2358,475.9567,847.2977,672.1387,973.50

Year 1Year 2Year 3Year 4Year 5

NOI550,000.00574,750.00600,613.75627,641.37655,885.23Less: Debt Service-297,174.65-297,174.65-297,174.65-297,174.65-297,174.65Before Tax Cash Flow252,825.35277,575.35303,439.10330,466.72358,710.58Less: Tax Payable-49,536.23-58,475.95-67,847.29-77,672.13-87,973.50After Tax Cash Flow203,289.12219,099.40235,591.80252,794.58270,737.07Assume NOI grows 4.5% annuallyAssume building will sell for $4.5MM in year 5

Step 1: Determine Tax PayableStep 2: Determine After-Tax Cash Flow