What is the value of this office building

Assignment Help Financial Management

Reference no: EM131826485

In a 200,000 SF office building complex, the lease contracts are renewed every 5 years. The first contract is just signed for $25/SF/year (current market rent) with rents paid in arrears (at the end of the year) annually. The rent is fixed during the contract period, but expected to be adjusted to the market rent between the leases. The market rent is expected to increase by 3% per year.1 The discount rate is 10%/year. a. What is the value of this office building, assuming that the building is sold at the end of year 10 and the cap rate at that time is expected to be 10%? What is the implied cap rate at time 0? b. What is the value of this office building, assuming that the building is sold at the end of year 10 and the cap rate at that time is expected to be the same as today? What is the implied cap rate at time 0 and 10? c. What is the value of this office building, assuming that the building will be held and rented indefinitely (perpetually)? What is the implied cap rate at time 0? d. What is the value if the rents are paid in advance (at the beginning of the year) and the building is rented perpetually?

Reference no: EM131826485

Questions Cloud

Describes the e-commerce management system : ITECH7410 Software Engineering Methodologies Assignment. You are to create a Z schema that ‘Buy It'. Describes the e-commerce management system

Think about how much time we spend using cell phones : Think about how much time we spend using cell phones. Have you ever wondered which cell phones would allow you to talk for the most time without having.

Is this good investment project : An acre (43,560 SF) of land in the CBD is being used as an open parking lot. Is this a good investment project?

Identify the e-discovery issue based on knowledge : Research current media stories related to cases involving e-discovery issues being tried or settled, etc. through newspapers, radio, T.V., Internet search.

What is the value of this office building : What is the value of this office building, assuming that the building is sold at the end of year 10 and cap rate at that time is expected to be same as today?

How might systems thinking change your perception : Senge (2006, p. 79) explains the two most basic loops used system diagrams. How might systems thinking change your perception of a situation?

Discuss specific decision-making processes : Theresa and Mike want to create a merged company that is defined by a culture of integrity, thus aiding employees in making ethical decisions.

Define emotional intelligence and its four domains : Define Emotional Intelligence and its four domains. Make a list of your personal examples/observations that match those characteristics and behavior associated.

Describe the given classification system as per requirement : For this unit's assignment, develop a minimum of a three-page essay describing a specific classification system that is universally adopted in the United States

User Account

All Pages