Question

A property is generating $100,000 in income and has expenses of $25,000. The investor pays $3,000 toward mortgage principal each year and $32,000 toward interest, plus another $4,000 in income taxes. What is the before-tax cash flow?

Answer 1

$40,000

Step-by-step explanation:

Calculation to determine the before-tax cash flow

Using this formula

Before-tax cash flow=Income-[Expense+(Debt service)]

Let plug in the formula

Before-tax cash flow=$100,000-[$25,000+($3,000 + $32,000)]

Before-tax cash flow=$100,000-($25,000+$35,000)

Before-tax cash flow=$100,000-$60,000

Before-tax cash flow=$40,000

Therefore the before-tax cash flow is $40,000