Question 2: (10 marks) firm is considering the purchase of an office property, t has done an extensive market analysis and has estimated based on current market supply and demand, rents and its estimate of operating expenses, annual NOI are as ABC ows NOI 1 million 1 million 1 miltion Year 2 1 million 1.2 millions 5 if the investment above is expected to produce NOI in years 1-5 and the growth rate after year 4 is 4% continues to infinity and ABC believes that investors should earn a 15% return on this investment: a) If the investment above is going to be owned for 5 years and then sold, what would be the value of the property b) d) today What would be the terminal capitalization rate be at the end of year 5? what is the "going-in" capitalization rate be based on year 3 NOT? What explains the difference between the "going-in" and terminal cap rate