1)A property is forecasted to generate annual rental income of $200,000 in year 1. Vacancy rate is...
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1)A property is forecasted to generate annual rental income of $200,000 in year 1. Vacancy rate is expected to be 10%, there is also a 5% management fee. Other operating expenses will total $30,000 for year 1. Rent is expected to grow at 5% in years 2 through 7, and other operating expenses are expected to grow at 3% in years 2 through 7. You believe that you can sell the property at the end of year 7 for $2,000,000.
a)Using a required rate of return of 18%, calculate a fair value of the property today (at t=0).
b)Using the value calculated in part a, what is the going-in cap. rate?
c)What is the cap. rate on the sale in year 7?
Related Book For
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain
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