Sky High Partners is evaluating a high-rise office building to add to its investment portfolio. To calculate a value, Sky High plans to use the income approach, based on the following estimates: Gross potential yearly rental income Estimated vacancy rate Yearly operating costs Market capitalization rate a. Compute the net operating income (NOI) for the building. Net operating income $ Valuation 448,525 $ 890,000 2.75% $ 417,000 148 b. Using the income approach, calculate the value for the office building. Note: Round your answer to the nearest whole number.

Sky High Partners is evaluating a high-rise office building to add to its investment portfolio. To calculate a value, Sky High plans to use the income approach, based on the following estimates: Gross potential yearly rental income Estimated vacancy rate Yearly operating costs Market capitalization rate a. Compute the net operating income (NOI) for the building. Net operating income $ Valuation 448,525 $ 890,000 2.75% $ 417,000 148 b. Using the income approach, calculate the value for the office building. Note: Round your answer to the nearest whole number.

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Description: Sky High Partners is evaluating a high-rise office building to add to its investment portfolio. To calculate a value, Sky High plans to usethe income approach, based on the following estimates:Gross potential yearly rental incomeEstimated vacancy ra

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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Concept explainers

Financial Ratios

A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.

Return on Equity

The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.

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Question

Sky High Partners is evaluating a high-rise office building to add to its investment portfolio. To calculate a value, Sky High plans to use
the income approach, based on the following estimates:
Gross potential yearly rental income
Estimated vacancy rate
Yearly operating costs
Market capitalization rate
a. Compute the net operating income (NOI) for the building.
Net operating income
$
Valuation
$ 890,000
2.75%
$ 417,000
14%
448,525
b. Using the income approach, calculate the value for the office building.
Note: Round your answer to the nearest whole number.

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