$1.$ An owner of XYZ Office Building is currently negotiating a five$-$year lease with ABC Corp. for $125,000$ rentable square feet of$$office space $($full building tenancy$).$ ACME would like a base rent of $$20$ per square foot with $3\%$ rent increases beginning one year from now.$$

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a$.$ What is the present value of cash flows to the Landlord under the above lease terms? $($Assume a $10$percent discount rate.$)$

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b$.$ If operating costs for the building are $12\%$ of the annual rent $($and the responsibility of the Landlord$),$ and these costs are expecting to increase at a rate of $5\%$ year, what is the annual NOI each year of the $5-$year lease term?

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c$.$ Assuming a Cap rate of $6\mathrm{.}5\%,$ what is the estimated market value of this building?