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1. You are considering the purchase of an apartment building with the following information: Purchase price Expected year 1 NOI Expected annual NOI growth Expected Exit Cap Rate Holding Period $12,500,000 $1,000,000 4% 8.5% 3 years Solve for each of the following: Initial (going in) cap rate Expected sales price end of year 3 Net Present Value at 9% Discount Rate IRR Would you buy this asset for $12,500,000? Why or why not? 2. An office building has the following investment characteristics: $2,100,000 $2,200,000 $2,300,000 $2,400,000 Year 1 NOI Year 2 NOI Year 3 NOI Year 4 NOI Initial (going in) cap rate Loan Principal 7% $18,000,000 Interest rate 5% Amortization 30 years Exit cap rate Holding period 8% 3 years Solve for each of the following: Purchase price Loan to value ratio Annual debt service Debt service coverage ratio for Loan balance at the end of year 3 Equity IRR year 1

1. You are considering the purchase of an apartment building with the following information: Purchase price Expected year 1 NOI Expected annual NOI growth Expected Exit Cap Rate Holding Period $12,500,000 $1,000,000 4% 8.5% 3 years Solve for each of the following: Initial (going in) cap rate Expected sales price end of year 3 Net Present Value at 9% Discount Rate IRR Would you buy this asset for $12,500,000? Why or why not? 2. An office building has the following investment characteristics: $2,100,000 $2,200,000 $2,300,000 $2,400,000 Year 1 NOI Year 2 NOI Year 3 NOI Year 4 NOI Initial (going in) cap rate Loan Principal 7% $18,000,000 Interest rate 5% Amortization 30 years Exit cap rate Holding period 8% 3 years Solve for each of the following: Purchase price Loan to value ratio Annual debt service Debt service coverage ratio for Loan balance at the end of year 3 Equity IRR year 1

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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1. You are considering the purchase of an apartment building with the following information: Purchase price Expected year 1 NOI Expected annual NOI growth Expected Exit Cap Rate Holding Period $12,500,000 $1,000,000 4% 8.5% 3 years Solve for each of the following: Initial (going in) cap rate Expected sales price end of year 3 Net Present Value at 9% Discount Rate IRR Would you buy this asset for $12,500,000? Why or why not? 2. An office building has the following investment characteristics: $2,100,000 $2,200,000 $2,300,000 $2,400,000 Year 1 NOI Year 2 NOI Year 3 NOI Year 4 NOI Initial (going in) cap rate Loan Principal 7% $18,000,000 Interest rate 5% 30 years 8% Amortization Exit cap rate Holding period 3 years Solve for each of the following: Purchase price Loan to value ratio Annual debt service Debt service coverage ratio for year 1 Loan balance at the end of year 3 Equity IRR
Transcribed Image Text:1. You are considering the purchase of an apartment building with the following information: Purchase price Expected year 1 NOI Expected annual NOI growth Expected Exit Cap Rate Holding Period $12,500,000 $1,000,000 4% 8.5% 3 years Solve for each of the following: Initial (going in) cap rate Expected sales price end of year 3 Net Present Value at 9% Discount Rate IRR Would you buy this asset for $12,500,000? Why or why not? 2. An office building has the following investment characteristics: $2,100,000 $2,200,000 $2,300,000 $2,400,000 Year 1 NOI Year 2 NOI Year 3 NOI Year 4 NOI Initial (going in) cap rate Loan Principal 7% $18,000,000 Interest rate 5% 30 years 8% Amortization Exit cap rate Holding period 3 years Solve for each of the following: Purchase price Loan to value ratio Annual debt service Debt service coverage ratio for year 1 Loan balance at the end of year 3 Equity IRR
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