What is the indicated value of the subject property using direct capitalization?
7. You are estimating the market 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 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 cap rate?c.If you expect that 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 cap rate?
3
Chapter 8: Valuation Using the Income Approach
8. Describe conditions under which the use of gross income multipliers to value the subject property is appropriate.
9. In what situations or for which types of properties might discounted cash flow analysis be preferred to direct capitalization?
10. Distinguish between levered and unlevered cash flows. In what sense does the equity investor have a residual claim on the property’s cash flow stream if mortgage financing is employed?
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- Spring '10
- Clements
- Net Income, Generally Accepted Accounting Principles, noi
