Described in part affects the current value of the property

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Consider an income producing property that according to your assumptions and estimations is currently worth $4M on an unlevered basis when a 7.5% required rate of return is applied. One of the assumptions that you have made when arriving at that estimate is that you will sell the property in 6 years for a CAP of 7%, which translates to $4.8M at that future point in time.

a. At what price will you sell the property in 6 years if all your assumptions materialized except that you will sell the property for a CAP of 8% instead of 7%? Show your calculations.

b. All other things equal, by how much the situation described in part a affects the current value of the property. Show your calculations.

Reference no: EM131487671

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