A company is looking for a retail property to buy. Its market analysis shows that based on current market supply and demand, trends in rents and per square foot operating and other expenses, the estimated net operation income amounts will be as follows. For the first two years it estimates $800,000 for the annual net operating income. During the following three years, market rents are expected to be higher, increasing the estimated net operating income by $70,000 each year. It is further expected that after that all the way through year 7, the net operation income will reflect a stable, balanced market and should grow at 6 percent per year. The company also considered past trends in real estate prices and believes that the building value will be appreciating by 5 percent per year up to and including the year of sale. The company believes that 14 percent return is appropriate for an investment of this kind in this real estate sector.

If you can, do the math in Excel with correct referencing to cells with intermediate results. This will allow you to avoid rounding errors. Otherwise, increase decimal places - the more the better! Say, 6 or even higher.

In the table below, fill out the estimated annual amounts of net operating income for the company's 6-year planned holding period. Don't use the "$" sign, and round to whole dollar.

Year 1	Year 2	Year 3	Year 4	Year 5	Year 6
$	$	$	$	$	$

The estimated Reversion value equals $ . Don't use the "$" sign, and round to whole dollar & the NEAREST THOUSAND (e.g., if you got 1,234,567 then type 1,235,000).

The estimated current value of the retail property equals $ . Don't use the "$" sign, and round to whole dollar & the NEAREST THOUSAND (e.g., if you got 1,234,567 then type 1,235,000).

The estimated going-in cap rate equals percent (don't use the "%" sign, and round to 2 decimal places: e.g., if you got "1.23 percent" then type 1.23), and the cap rate formula uses the net operating income from year (type a number, no decimals. E.g., type 10 if your answer is "Year 10").

The estimated going-out cap rate equals percent (don't use the "%" sign, and round to 2 decimal places: e.g., if you got "1.23 percent" then type 1.23), and the cap rate formula uses the net operating income from year (type a number, no decimals. E.g., type 10 if your answer is "Year 10").

For this investment, the shorter the holding period, the __ the reversion value, the __ the current value, and the __ the going-in cap rate. I pick . (Type a number that corresponds to your answer from the options in the table below. E.g., type 1 if you pick the first row.)

1	higher, higher, higher
2	higher, higher, lower
3	higher, lower, higher
4	lower, lower, higher
5	lower, lower, lower
6	lower, higher, lower