What is the market value of this property according to the direct capitalization approach?

1. Estimate the NOI for year 1.
2. Use the appropriate cap rate.

What is the market value of this property according to the discounted cash flow approach? Assume that you are going to sell the property at the end of the 5^th year of ownership.

1. Estimate the NOI for the holding period (each year individually).
2. Estimate the terminal value.
3. Use the appropriate discount rate to arrive at the NPV

(Answers highlighted please)

Use the information provided below to estimate the market value of the office building that has been described. Type of Property Office Building Leasable Space 100,000 square feet Average Rent $20.00 per square foot per year Expected Rent Growth 4.50% per year Vacancy and Collection Losses 15.00% of potential gross income Other Income $1.50 per square foot per year Expected Growth in Other Income 3.00% per year es Operating Expenses 27.50% of effective gross income Capital Expenditures 2.50% of effective gross income Going-In Cap Rate 5.50% Going Out Cap Rate 6.25% Selling Expenses 4.00% of future selling price Discount Rate 6.75% Use the information provided below to estimate the market value of the office building that has been described. Type of Property Office Building Leasable Space 100,000 square feet Average Rent $20.00 per square foot per year Expected Rent Growth 4.50% per year Vacancy and Collection Losses 15.00% of potential gross income Other Income $1.50 per square foot per year Expected Growth in Other Income 3.00% per year es Operating Expenses 27.50% of effective gross income Capital Expenditures 2.50% of effective gross income Going-In Cap Rate 5.50% Going Out Cap Rate 6.25% Selling Expenses 4.00% of future selling price Discount Rate 6.75%