Use the Following Information to Answer the Following Two Questions

Multiple Choice

Use the following information to answer the following two questions. You are making a 10-year cash flow pro-forma for a lender, on a non-residential commercial building which you have just purchased (on January 1) and plan to own for 10 years (the maturity of the loan you are requesting) . The building has a single tenant in a 20-year lease that commenced at the time of building purchase (January 1) .
-Purchase Price: $3,000,000 including $500,000 in assessed land value.
-Tenant Improvement Expenditures (all spent on building made at time of purchase, beginning of lease) : $1,000,000.
-Leasing Brokerage Commission (paid at time of purchase, beginning of lease) : $300,000.
-Capital Gains Tax Rate (on economic gain) : 15%.
-Recapture Tax Rate: 25%.
-Ordinary Income Tax Rate: 35%.
Be completely realistic in your treatment of all sources of capital gains and recapture tax.
-What is the difference between the before-tax and after-tax reversion cash flow at the end of Year 10 in the pro-forma if you project net property resale proceeds at that time of $4,000,000?

A) $186,859.
B) $261,859.
C) $314,103.
D) $355,682.
E) None of the above.