1 Peyton Jackson knows that applying cap rates is a good way to estimate the value...

  

Transcribed Image Text:

1 Peyton Jackson knows that applying cap rates is a good way to estimate the value of a lodging property. He is consider- ing the purchase of three different properties. The financial information he has about them is presented below. Using that information, help Peyton calculate the answers needed to make a good purchase decision. Last Year Net Operating Income (NOI) ($) Property Last Year Sales ($) LaSalle Inn 1,541,250 373,450 The Breakers Lodge 3,117,500 623,750 The Waterford 2,700,000 541,200 a. If Peyton could pay $3,000,000 for it, what would be the cap rate for the LaSalle Inn, based upon the NOI it achieved last year? Net Operating Income Investment Amount $3,000,000 Cap Rate % b. If Peyton could pay $7,000,000 for it, what would be the cap rate for the Breakers Lodge, based upon the NOI it achieved last year? Net Operating Income Investment Amount $7,000,000 Cap Rate % c. If Peyton could pay $6,000,000 for it, what would be the cap rate for the Waterford, based upon the NOI it achieved last year? Net Operating Income Investment Amount $6,000,000 Cap Rate % d. If Peyton is satisfied with a hotel purchase returning a 10.5% cap rate: At what price would he value the LaSalle Inn? Net Operating Income Investment Amount 10.5% Cap Rate % 1 Peyton Jackson knows that applying cap rates is a good way to estimate the value of a lodging property. He is consider- ing the purchase of three different properties. The financial information he has about them is presented below. Using that information, help Peyton calculate the answers needed to make a good purchase decision. Last Year Net Operating Income (NOI) ($) Property Last Year Sales ($) LaSalle Inn 1,541,250 373,450 The Breakers Lodge 3,117,500 623,750 The Waterford 2,700,000 541,200 a. If Peyton could pay $3,000,000 for it, what would be the cap rate for the LaSalle Inn, based upon the NOI it achieved last year? Net Operating Income Investment Amount $3,000,000 Cap Rate % b. If Peyton could pay $7,000,000 for it, what would be the cap rate for the Breakers Lodge, based upon the NOI it achieved last year? Net Operating Income Investment Amount $7,000,000 Cap Rate % c. If Peyton could pay $6,000,000 for it, what would be the cap rate for the Waterford, based upon the NOI it achieved last year? Net Operating Income Investment Amount $6,000,000 Cap Rate % d. If Peyton is satisfied with a hotel purchase returning a 10.5% cap rate: At what price would he value the LaSalle Inn? Net Operating Income Investment Amount 10.5% Cap Rate %