The net operating income (NOI) for a small income property is expected to be $100,000 for the first year. Financing will be based on a 1.25 debt coverage ratio applied to the first year NOI, will have a 5 percent interest rate, and will be amortized over 15 years with fixed monthly payments. The NOI will increase 10 percent per year indefinitely after the first year. The investor expects to hold the property for five years. The resale price is estimated by applying the terminal capitalization rate approach, with the terminal capitalization rate of 9 percent. Investors require a 14 percent annual rate of return on equity (a.k.a. equity yield rate) for this type of property.

1. What is the present value of the equity interest in the property? Calculate and explain.
2. What is the implied equity dividend rate? Calculate and explain. What does this number mean?
3. What is the total current value of the property? Calculate and explain.
4. What is the implied going-in capitalization rate? Calculate and explain.