An income property for sale is expected to generate NOI of $100,000 in the 1st year, increasing by 3% per year. An investor is considering buying it for a 5-yearholding period. The investor is planning to finance the purchase using 1st-year DCR = 1.2, as required by the lender. The loan will be based on a 20-year amortization term, 10% annual rate of interest, & will require monthly payments. The terminal cap rate for the property is 11% Investors require a 12% return on equity for this type of property

1) What are the cash flows to the equity investor over the 5-year holding period?

(2)What is the PV of the cash flows on Equity investment (E)?

(3)What is the PV of Mortgage loan financing (M)?

(4)What is the current value of the property?

(5)What is the implied LTV used by the investor?

(6)What is the 1st-year "equity dividend rate"?

(7)What is the "going-in" cap rate?

If the first year's NOI increases further, the investor's first year return (or the equity dividend rate) will ___ and the going-in cap rate will ___ . Your answer to this statement is

Select one of these choices for the question above ^

1: increase, increase

2: increase, remain unchanged

3: increase, decrease

4: remain unchanged, increase

5: remain unchanged, remain unchanged

6: remain unchanged, decrease

7: decrease, increase

8: decrease, remain unchanged

9: decrease, decrease