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1. You wish to purchase an office building that has an asking price of $8,000,000. The projected NOI in year 1 is $700,000 and the NOI growth rate will be 2%. The going in cap rate and the terminal cap rate are both 8%. Your required rate of return is 10%. You plan to finance this acquisition with a 80% LTV interest only loan with a 6% interest rate. If you have a 5 year holding period, what is your projected project IRR? (State your answer as a percentage, rounded to 2 decimal places. For example, if your answer is twelve and three quarters, enter 12.75.)

2.You wish to purchase an office building that has an asking price of $8,000,000. The projected NOI in year 1 is $400,000 and the NOI growth rate will be 1%. The going in cap rate and the terminal cap rate are both 8%. Your required rate of return is 10%. You plan for a 5 year holding period and will choose an interest only loan with a 90% LTV to finance your purchase. The interest rate on the loan will be 7%. What is the estimated IRR for this investment? (State your answer as a percentage, rounded to 2 decimal places. For example, if your answer is twelve and three quarters, enter 12.75.)

3.You own an office building you believe to be currently worth $10,000,000. The projected NOI next year is $500,000 and the NOI growth rate will be 2%. The going in cap rate and the terminal cap rate are both 8%. You have a 80% debt financing. Your required rate of return is 10%. You plan to hold the property for 5 more years. Currently you have an interest only loan with a 8% rate. A different lender offers to refinance your loan at 6.5%, but you must pay fees equal to 2% of the loan balance in order to get this loan. What is the difference in project IRRs in these two financing options, all else equal. Hint: find IRR on new potential loan option and subtract IRR using current financing option. (State your answer as a percentage, rounded to 2 decimal places. For example, if your answer is twelve and three quarters, enter 12.75.)

4.A REIT earns $1,000,000 in rent, pays $400,000 in operating expenses, sold one property for a gain of $200,000 and had $150,000 of depreciation. If there are 50,000 shares of this REIT outstanding, what is the FFO/share? Round to the nearest cent.

5.When leverage increases, all else held equal, what will happen to ROE? Increase, decrease, or stay the same?

6.When the mortgage interest rate increases, all else held equal, what will happen to ROE? Increase, decrease, or stay the same?

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