An apartment building has an effective income of $150,000. Given expenses of $64,000 and depreciation of $12,000, what is the property's pre-tax cash flow if interest payments total $40,000 and principal payments are $5,000?

To determine the property's pre-tax cash flow, we need to start with the effective income and subtract both the expenses and the interest payments, while also accounting for depreciation.

Here's how the calculation works:

1. Begin with the effective income: $150,000.

2. Subtract the total expenses: $64,000.

• This gives us $150,000 - $64,000 = $86,000.

3. From the remaining amount, we also subtract the interest payments of $40,000.

• Now we have $86,000 - $40,000 = $46,000.

4. It is important to clarify that while depreciation is a non-cash expense affecting net income on tax returns, it does not impact cash flow calculations directly when assessing cash positions.

Therefore, the cash flow after these calculations is the effective income remaining after all necessary payments and expenses which leads us to the pre-tax cash flow of $46,000.

Since the property’s pre-tax cash flow is defined as the net cash generated before tax implications, the correct consideration of expenses and interest payments reveals that the answer is indeed $46,000.