End of Chapter 14 Questions and Answers

End of Chapter 14 Questions and Answers - End of Chapter 14...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
End of Chapter 14 Questions and Answers 1. Can a property have a break even point above 1.0? What would this imply? Answer: No, it would imply greater than 100% occupancy. 2. What is the difference between the Net Operating Income and the Before-tax Cash Flow? Answer: Before tax cash flow is after debt service while the NOI is prior to debt service. The NOI is the free and clear return on an unlevered property. 3. Consider the projection of the reversion value in a multi-year proforma. a) What should be the typical expected relationship between the going-in cap rate and the going-out (“reversion value”) cap rate projected for the resale of the property at the end of the expected holding period (i.e., should you usually expect the going-out to be less than, equal, or greater than the going-in)? b) Why? Answer: The going in cap rate should be higher than the going out cap rate as the property is likely to wear out a little and higher risk of uncertain repair induces a higher cap rate. c) How would your answer change if you project capital improvements during the holding period?
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern