Fin 4713: Chapter 15: A Basic Building Proforma Name:___________________
Use the Skeleton Spreadsheet as a starting point and create a spreadsheet that shows
the results of Example1 and Example2.
Note: The blue shaded portions are user input areas. All of the missing parts are
generated by appropriate formulas.
Starting with the results of Example 2 displayed, complete the following questions. After
each question, return to the starting conditions of Example 2.
1. Leverage: Demonstrate this building has positive leverage by entering Mortgage
LTV’s of, 0, 25%, 50%, 75%
Mortgage LTV After Tax IRR Before Tax IRR Year 1 DCR Year 1 C on C
0%
25%
50%
75%
2. At what mortgage rate does this building show a neutral leverage position?
3. If the minimum allowable DCR in Year 1 is 1.75, what is the maximum LTV on this
building?
4. Breakeven Analysis. At what vacancy rate does DCR (Year 1) = 1.0?
5. Obama Tax Plan? Because this building is owned by a rich person, let’s give him a
tax increase. Use the following rates: Marginal Tax Bracket = 39%, Depn Recovery =
39%, Capital Gain Rate = 25%. What is the IRR and NPV of the building?
