Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. problem 10-9 the noi for a small income property

Problem 10-9 The NOI for a small income property is expected to be...

70.2K

Verified Solution

Question

Accounting

Problem 10-9
The NOI for a small income property is expected to be $155,100 for the first year. Financing will be based on a 1.2 DCR applied to the
first year NOI, will have a 10 percent interest rate, and will be amortized over 20 years with monthly payments. The NOI will increase 4
percent per year after the first year. The investor expects to hold the property for five years. The resale price is estimated by applying a
9 percent terminal capitalization rate to the sixth-year NOI. Investors require a 15 percent rate of return on equity (equity yield rate) for
this type of property.
Required:
a. What is the present value of the equity interest in the property?
b. What is the total present value of the property (mortgage and equity interests)?
c. Based on your answer to part (b), what is the implied overall capitalization rate?
Complete this question by entering your answers in the tabs below.
What is the present value of the equity interest in the property?
Note: Do not round intermediate calculations. Round your final answer to the nearest whole dollar.
image

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students