What is the value of this office building

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Question - We just signed a lease contract in a 200,000 SF of?ce building complex for $25/ SF / year with rents paid in arrears (at the end of the year) annually. The rent will increase by 3% per year. The discount rate is 10% / year.

a. What is the value of this offce 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 inde?nitely (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: EM132632989

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