You own a real estate investment company and your interns have provided the below annual estimates of NOI for an office building you can acquire today for $5m. Year 1 Year 2 Year 3 Year 4 NOI $367,331 $378,799 $405,723 $402,361 They also estimate you would receive $6.2m in net sale proceeds when the property is sold at the end of 3 years based on paying 5% brokerage expenses. PNC bank has offered you a 3-year $3m interest-only loan at 7% with annual payments and no origination fees. What is your estimate of the current market value of the property using the direct capitalization method if an appraiser would assume a market cap rate of 5.7% and typical owners in the market have a 9% opportunity cost of equity? Please round your answer to nearest dollar.

How much taxable income would you be eligible to deduct during the first year due to the mortgage interest deduction?

What is the UNLEVERED internal rate of return of the investment?

What is the LEVERED internal rate of return of the investment?

You changed your mind. At the end of year 2, what is the estimated Net Sale Proceeds (NSP) received by the owner of the property if they anticipate brokerage expenses of 5% and a future buyer will apply a 5% capitalization (cap) rate to anticipated net operating income as illustrated below?