Question
You are considering the purchase of an apartment building with the following information: Purchase price $16,667,000 Expected Year 1 NOI $1,000,000 Expected annual NOI growth
You are considering the purchase of an apartment building with the following information:
| Purchase price | $16,667,000 |
| Expected Year 1 NOI | $1,000,000 |
| Expected annual NOI growth | 4% |
| Expected Exit Cap Rate | 6.5% |
| Holding Period | 3 years |
Initial (going in) cap rate = 6% Expected sales price when you sell the asset after 3 years = 16,640,000
What is the Net Present Value at a 7% Discount Rate? What is the IRR for this investment? Would you buy this asset for $16,667,000? Why or why not?
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Money Talks Explaining How Money Really Works
Authors: Nina Bandelj ,Frederick F. Wherry ,Viviana A. Zelizer
1st Edition
0691202893, 978-0691202891
