Part I. Determining Market Value using both Direct Capitalization and Discounted Cash Flow Analyses with All Data Provided to You.

A) Calculating Cap Rates Based on 3 Recent Similar Sales Assume you have an appraisal assignment to generate and capitalization rate for use in a recently built Office Building in Midtown Omaha. Fortunately, there are two other similar buildings that are nearby, similar and also recently built that have known sales prices.

Property 1 sold for 2 million and has gross annual rental income of $260,000 per year, vacancy losses of 10% and expenses of 5%.

Property 2 sold for $1.8 million has gross rental income of $190,000, vacancy losses of 5% and expenses of 8%.

Property 3 sold for $1.6 million, with gross rental income of $140,000 vacancy losses of 7% and expenses of 7%