Answered step by step
Verified Expert Solution
Question
1 Approved Answer
1. Because of existing leases, a property is projected to have NOI of $90,000 per year for each of the next five years. All of
1. Because of existing leases, a property is projected to have NOI of $90,000 per year for each of the next five years. All of the leases will have expired at the end of the five years. If the property were not encumbered by existing leases, the appraiser estimates that the NOI would be $100,000 for the first year and increase by 3 percent each year over a projected holding period of five years. a. Estimate the value of the fee simple estate by discounting the cash flows at a 12 percent discount rate. b. Estimate the value of the leased fee estate by discounting the appropriate cash flows at an 11 percent discount rate. c. What does the difference in the answers for part A and B represent?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started