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6 October, 15:43

Suppose that examination of a pro forma reveals that the fifth-year net operating income (NOI) for an income-producing property that you are analyzing is $913,058 (you can assume that this cash flow occurs at the end of the year). If you estimate the projected rental growth rate for the property to be 3% per year, determine the projected sale price of the property at the end of year 5 if the going-out capitalization rate is 8%.

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  1. 6 October, 16:02
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    The project sale price at the end of year 5 is $ 11,755,622

    Explanation:

    Solution

    Recall that:

    Analyzing an income producing property is = $913,058

    The rental rate of growth for the property to be is = 3%

    At the end of the year 5, the projected sale price of the property if going g-out capitalization is = 8%

    Then

    we find the projected sales price is given below:

    = ($ 913,058 x 1.03) / 0.08

    = $940,449.74/0.08

    = $ 11,755,622
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