Real Estate Principles 3rd Edition by David Ling,Wayne Archer

Exercise 9

Use the following property data:
Cash flow from operations:
Cash flow at sale:

a. Assuming the going-in capitalization rate is 8 percent, compute a value for the property using direct capitalization.
b. Assuming the required return on unlevered cash flows is 10 percent, and that the property will be held by a buyer for five years, compute the value of the property based on discounting unlevered cash flows.
c. Assuming the relevant required return on levered cash flows is 15 percent, and that the property will be held by a buyer for five years, what is the present value of the levered cash flows