Case Problem 127 1. Develop a prior-year's reconstructed operating statement, assu competent, professional management. Based on the reconstructed etp ing income and the current market value, determine the capitalization rate. ning typically 2. Develop a seven-year forecast of net operating income for the St. George Apartments, incorporating the following assumptions: a. Potential gross rent and miscellaneous other income will grow at 2.5 per cent per annum over the forecast period. b. Vacancies in the market area will remain constant over the forecast peri c. Operating expenses other than management fees and property ta xes will grow at 2.5 percent per annum over the forecast period d. M anagement fees as a percent of effective gross income will remain con- stant over the forecast period. e. Property taxes are expected to increase to $76,048 in the third year of the forecast and to $85,039 in the seventh year. 3. Assuming that the capitalization rate will remain constant, develop an estimate of the property's market value at the end of the projected holding period. Why might it become larger or smaller that the currently prevailing rate? Save your work. It will be needed to solve case problems for Part Three. 4. Suggest some reasons why the capitalization rate might not remain constant. Case Problem 127 1. Develop a prior-year's reconstructed operating statement, assu competent, professional management. Based on the reconstructed etp ing income and the current market value, determine the capitalization rate. ning typically 2. Develop a seven-year forecast of net operating income for the St. George Apartments, incorporating the following assumptions: a. Potential gross rent and miscellaneous other income will grow at 2.5 per cent per annum over the forecast period. b. Vacancies in the market area will remain constant over the forecast peri c. Operating expenses other than management fees and property ta xes will grow at 2.5 percent per annum over the forecast period d. M anagement fees as a percent of effective gross income will remain con- stant over the forecast period. e. Property taxes are expected to increase to $76,048 in the third year of the forecast and to $85,039 in the seventh year. 3. Assuming that the capitalization rate will remain constant, develop an estimate of the property's market value at the end of the projected holding period. Why might it become larger or smaller that the currently prevailing rate? Save your work. It will be needed to solve case problems for Part Three. 4. Suggest some reasons why the capitalization rate might not remain constant