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You are a real estate mogul considering a three - year investment in an office property project. Your analysts have located a property in the

You are a real estate mogul considering a three-year investment in
an office property project. Your analysts have located a property in
the city. You are provided with the following information:
You can buy the building today for 10 million without borrowing.
The building's gross leasable area is 80,000 square feet.
You anticipate that the market rent will be 20/ sqft p.a. in the
coming year, with rent growth of 3% per year thereafter.
The office building's vacancy allowance is 8% of potential gross
income.
The operating expenses will be 30% of the net gross income.
You estimate that the going-out (exit) cap rate at the end of 3rd
year (EOY3) will be 5%.
The required rate of return (discount rate) is 15% p.a.
Ignore transaction cost.
(a) Given the table below, what is the net operating income of the
office building in each year?
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