Expected to generate a net operating income

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Your company is exploring the opportunity to buy an office building that is expected to generate a Net Operating Income (NOI) of $650,000 next year. The NOI is expected to grow at 2.5% each year. After 5 years (i.e. at the end of the 5th year) you can expect to sell the building for $9,500,000. Your required rate of return (i.e. the discount rate) is 5.5%, compounded annually. You will first need to fill in the following table. (Nothing should be entered in the row labeled Reversion until year 5)

1. In YEAR 3 the interest rate (I=?) is and number of periods (N=?) are and the payment amount (PMT=?) is

2. What is the future value for year 1?

3. What is the cap rate of the building referenced above if it is valued at $8,250,000 today?

Reference no: EM131842140

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