Please help me

2. Your company is exploring the opportunity to buy an office building that is expected to generate a Net Operating Income (NOI) of $750,000 next year. The NOI is expected to grow at 3.5% each year. After 5 years (i.e. at the end of the 5^th year) you can expect to sell the building for $10,000,000.

Your required rate of return (i.e. the discount rate) is 5.5%, compounded annually. You will first need to fill in the following table. (Nothing should be entered in the row labeled Reversion until year 5)

	Year 1	Year 2	Year 3	Year 4	Year 5
NOI	750000	776250	803418.75	831538.4	860642.2
Reversion	ssssssssssssss	Ssssssssssss	ssssssssssssssss	sssssssssssssssss

What is the estimated value of the building today? (Hint: you need to consider both the cash flows and the reversion value. Do not just Cap the first years NOI)

Year 1	Year 2	Year 3	Year 4	Year 5
N=	N=	N=	N=	N=
I=	I=	I=	I=	I=
Solve for PV=	Solve for PV=	Solve for PV=	Solve for PV=	Solve for PV=
PMT=	PMT=	PMT=	PMT=	PMT=
FV=	FV=	FV=	FV=	FV=

Note: 5^th year cash flow includes reversion

OR

Use CF keys (remember to add reversion in year 5 cash flow).

3) Cap Rates

a) What is the cap rate of the building referenced above if it is valued today at $9,000,000?

b) Suppose there is another building just across the street that is very similar to the one you just valued. Next years NOI for the other building is projected to be $775,000. What is a good approximation for the value of the building, based upon information from part a) of the problem?

4) Mortgage Calculations and Amortization

a) You have just bought a house that has a purchase price of $450,000. The loan has a 70% LTV (loan-to-value ratio). What is the amount of the loan for which you are eligible?

b) The mortgage will fully amortize over 25 years with a rate of 6%, compounded monthly. What are your monthly payments for this loan?

PV=

N=

I/Y=

CPT, PMT =

c) Suppose you have a loan for $250,000 fully amortizing over 25 years at 5.5%, compounded monthly. What is the monthly payment on the loan?

PV=

N=

I/Y=

CPT, PMT =

(Note: for problems d through f, use the loan information given above in problem c.)

d) What is the outstanding balance at the end of 10 years (i.e. at the end of the 120^th month)?

PV=

PMT=

N=

I/Y=

FV =

e) How much principal has been paid to date?

f) How much interest have you paid to date?