CALCULATION STEPS Harvard Case Solution & Analysis

Question 1

            In the first part the taxable income has been calculated by taking the NOI and subtracting all the expenses including depreciation. After that,the BTCC has been calculated by taking the NOI and deducting the debt service which is 0 as no loan has been taken.

In second part the taxable gain has been calculated by deducting the adjustable cost from the net sales proceeds.

In the third part the capital account starting and ending balance has been created by adjusting for taxable income, BTCC and share of the capital gain on sale.

In the fourth part the ATIRR has been calculated for both the partners (combined).

In the fifth part the ATIRR has been calculated for limited partner only.

In the fourth part the ATIRR has been calculated for limited partner assuming that loan has been taken.

Question 2

            The annual interest rates have been converted into monthly rates by dividing by 12. Interest carry has been calculated by applying the interest rate on the loan amount in each month plus the previous month’s interest. The ending balance has been calculated by taking the previous balance adding the new loan taken and the interest paid for that month.

Question 3

For first part the taxable income and capital gain has been calculated as in Question 1. The mortgage yield has been calculated by taking the total shares of mortgage holder with year 3 outstanding mortgage balance.

Question 4

For part A and B the CD for senior class, subordinated class and residual class have been created by applying their respective coupon rates each year. The total interest at year 4 has been divided by the initial investment to calculate the return.

CALCULATION STEPS Case Solution

Question 5

The prices of MBS security has been calculated by applying its respective formula. Similarly, the prices of IO and PO securities have been calculated by applying the IPMT excel formula with their respective interest rates for each part.

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