You are a senior analyst underwriting the acquisition of a $100 million office building in San Francisco.
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Question:
You are a senior analyst underwriting the acquisition of a $100 million office building in San Francisco. The following data is available; the average cap rate of competing buildings is 7%, the price per sq. ft. of competing buildings is $600, the risk premium for this type of property is 7.5%, the loan will be at 70% LTV, with interest at 5% and 30 yr. amortization, the Ten-Year TNote is 3.0% and the gross rents of the building are expected to grow 2.5% per year. What are the formula capitalization rate and discount rate of the acquisition?
(A) 8% and 10.5%
(B) 10.5% and 8%
(C) 7% and 10%
(D) 10% and 7%
Related Book For
Marketing Research
ISBN: 978-1118156636
11th edition
Authors: David A. Aaker, V. Kumar, Robert Leone, George S. Day
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