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28 February, 19:34

uppose 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 $138,446 (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 5% per year, determine the projected sale price of the property at the end of year five if the going-out capitalization rate is 9%.

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  1. 28 February, 19:36
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    Calculate the sale price at the end of year 5 as follows:

    Sale price at the end of year 5 = NOI x (1 + growth Tale) / Capitalization rate

    Sale price at the end of year 5 = $138,446 x (1 + 0.05) / 0.09

    Sale price at the end of year 5 = $145,368.3 / 0.09

    Sale price at the end of year 5 = $1,615,203.333

    Therefore, the projected sale price of the property at the end of year 5 is $1,615,203.33
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