1. You are considering purchasing a property that you forecast will have the following NOI for years 1-5. (You have included all expenses in your NOI calculation, so your Cash Flow before Financing is equal to your NOI.) You believe NOI will grow at 2% per year after year 5. If you are seeking an 11% IRR. Conduct your analysis over 5 years and use a going out cap rate of 9%. Year 1, NOI = 350,000

Year 2, NOI = 360,500

Year 3, NOI = 370,000

Year 4, NOI = 385,000

Year 5, NOI = 395,000

a. What would your purchase price need to be to achieve your desired 11% return? b. How much of the property value is derived from the operating cash flows rather than the reversion?