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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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