Question
could you help me to find the answer of these questions these are about finance class Husky Point Bar and Grill is a bar/grill in
could you help me to find the answer of these questions these are about finance class
Husky Point Bar and Grill is a bar/grill in a university town in Minnesota. You are interesting in purchasing Husky Point Bar and Grill. Consider the following information:
Husky Point Bar and Grill has been open for 5 years. Sales come predominately from businesses in the downtown district for lunch and college students on nights and weekends. Gross Sales for Husky Point were $120,000 last year and over the five year period have been growing at a rate of about 5% per year. Operating expenses at the property are expected to be 40% of effective gross rent and capital expenses are projected to be 5% of EGI. In addition to bar/food sales, Husky Point rents out parking spaces to a neighboring property for $500/month.
Step 2: Direct Capitalization Approach to Value
V=I/R
Value of Property = First Year NOI/Capitalization Rate
Determine Capitalization Rate from Market Extraction
Recent sales
Comparable | NOI (yr 1) | Sale Price | Cap Rate | Price/NOI |
|
|
|
|
|
Red Rug | 110,000 | 1,000,000 |
|
|
SB Dearles | 85,000 | 900,000 |
|
|
Rockets | 98,000 | 950,000 |
|
|
DC Mugouts | 76,000 | 815,000 |
|
|
Press-tons | 105,000 | 990,000 |
|
|
Step 3: DCF (Discounted Cash Flows) Approach to Value
CF1 = _________
CF2 = _________
CF3 = _________ + _________
Going out Cap Rate is 50 basis points higher than going in cap rate
Sale price is terminal year income/going out cap rate.
Net Sale Proceeds = Sale Price-Selling Expenses (5%)
Required Return is 11%
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