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  3. question 3 you are given the following informatio

Question 3 You are given the following information to estimate the value of this...

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Accounting

Question 3
You are given the following information to estimate the value of this office building:
Owners Annual Income Statement 2023
Potential Gross Rent $60,000
Less: Operating & capital expenses
Power $2,200
Heat 1,700
Janitor 4,600
Water 3,700
Maintenance 4,800
Capital expenditures 2,800
Management 3,000
Vacancy and collection losses at 5% of potential gross income.
a) Calculate the NOI of this property for 2023.
b) Using a cap rate of 11%, what is the estimated value of this property using the Direct
Capitalization method?
c) Estimate the market value of the following small office building using the Discounted Cash
Flow method, given the following information:
Holding period: 7 years
Assuming that NOI grows by 3% per year in the first 4 years, then 2% per year
thereafter
Terminal cap rate is estimated to be 10%
Discount rate: 11%

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