A property is leased for $24,000 per year although market rents are currently $27,500 per year and are expected to increase by 2% per year. The property is expected to be sold at the end of year 10 based on a 10% terminal cap rate applied to the eleventh year NOI. The current lease on the property will expire at the end of year 10 so the property can be leased in the eleventh year at market rates. What is the value of the leased fee estate based on an 11.5% discount rate? (C) (A) $362,489 (B) $298,325 (C) $251,298 (D) $271,486
A property is leased for $24,000 per year although market rents are currently $27,500 per year and are expected to increase by 2% per year. The property is expected to be sold at the end of year 10 based on a 10% terminal cap rate applied to the eleventh year NOI. The current lease on the property will expire at the end of year 10 so the property can be leased in the eleventh year at market rates. What is the value of the leased fee estate based on an 11.5% discount rate? (C) (A) $362,489 (B) $298,325 (C) $251,298 (D) $271,486
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:18. A property is leased for $24,000 per year although market rents are currently $27,500 per
year and are expected to increase by 2% per year. The property is expected to be sold at
the end of year 10 based on a 10% terminal cap rate applied to the eleventh year NOI. The
current lease on the property will expire at the end of year 10 so the property can be leased
in the eleventh year at market rates. What is the value of the leased fee estate based on an
11.5% discount rate? (C)
(A) $362,489
(B) $298,325
(C) $251,298
(D) $271,486
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