Solution The abstracted going in capitalization rates from the four properties

Solution the abstracted going in capitalization rates

This preview shows page 5 - 7 out of 8 pages.

7.You are estimating the value of a small office building. Suppose the estimated NOI for the first year of operations is $100,000. a. If you expect that NOI will remain constant at $100,000 over the next 50 years and that the office building will have no value at the end of 50 years, what is the present value of the building assuming a 12.2% discount rate? If you pay this amount, what is the indicated initial cap rate? b. If you expect that NOI will remain constant at $100,000 forever, what is the value of the building assuming a 12.2% discount rate? If you pay this amount, what is the indicated initial cap rate? c. If you expect the initial $100,000 NOI will grow forever at a 3% annual rate, what is the value of the building assuming a 12.2% discount rate? If you pay this amount, what is the indicated initial cap rate?
Image of page 5
6 8.Describe the conditions under which the use of effective gross income multipliers to value the subject property is appropriate.
Image of page 6
Image of page 7

You've reached the end of your free preview.

Want to read all 8 pages?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture