Calculating Net Income and Cash Flow: A Comprehensive Guide

Depreciation Cost of the apartment100,000 Tax rate30% Annual reportable income calculation Rent24,000 Expenses Property taxes-1,500 Miscellaneous expenses-1,000 Depreciation-10,000 Reportable income11,500 Taxes (rate = 30%)-3,450 Net income8,050 Net income8,050Rev - Ex - Add back depreciation10,000Rev - Ex - Cash flow18,050(Rev - Ex - Rent24,000CF = R - E ExpensesCF = (1 - T Property taxes-1,500 Miscellaneous expenses-1,000 Depreciation0 Reportable income21,500 Taxes (rate = 30%)-6,450 Net income without depreciation15,050 Depreciation tax shield3,000 Cash flow18,050 Discount rate12% YearCash flow 0-100,000 118,050 218,050 318,050 418,050 518,050 618,050Cash flow, method 1 Add back depreciation Cash flow, method 2 Compute after-tax income without depreciation, then add depreciation tax shield