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 three years it estimates $600,000 for the annual net operating income. During the following one year, market rents are expected to be higher, increasing the estimated net operating income by $90,000 over the 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 5percent per year. The company also considered past trends in real estate prices and believes that the building value will be appreciating by 3.5percent per year up to and including the year of sale. The company believes that 12percent return is appropriate for an investment of this kind in this real estate sector.

a. What is the estimated annual amounts of net operating income for the company's planned holding period? Year 1, 2, 3, 4, 5, & 6

b. What is the estimated Reversion value?

c. What is the estimated current value of the retail property?

d. What is the estimated going-in cap rate? And, the cap rate formulauses the net operating income from what year?

e. What is the estimated going-out cap rate? And, the cap rate formulauses the net operating income from what year?

f. For this investment,the shorter the holding period,the _____ the reversion value, the _____the current value,and the _____ the going-in rate. Answer from the options in the table below

?

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