# FIR 4350 – An apartment is expected to produce $115,000 NOI the first year

WordPerfect Office DocumentNeed help with these.In working this problem set pay close attention to the instructions on our class web site. Remember, even though you can gain help in the threads, this is still an individual assignment. This assignment does not need to be typed; however, it is very important that you organize your answers clearly and legibly. Since I give partial credit, it is imperative that you show your work in a logical manner. In any written response, remember that I place more weight on content and organization than I do on quantity.You can deliver this assignment to me by posting it the “Dropbox” for this unit – see top bar for the tab for the Dropbox. Attaching it as a file in an e-mail to me is another possibility.1 After the due date, I will be posting the solutions on the web site, and once graded, I will be posting your grade in the grade book. If you would like me to return the problem set to you after I have graded it, please send me an e-mail with the address you would like it sent. This problem set is worth 75 points (question 1 and 4 are worth 15 points – questions 2 is worth 25 points – question 3 and 5 are worth 10 points).An apartment is expected to produce $115,000 NOI the first year, increasing by 3 percent per year each year over a projected 7 year holding period. A 80 percent loan-to-value ratio is typical. Current terms are 6.5 percent interest for 25 years (annual payments). Equity investors expect a 12 percent yield. The property is expected to increase in value by 15 percent over the holding period. Value the property using Ellwood.An office property with 60,000 square feet of rentable space is expected to rent for $40 per square foot in the coming year. Rent is expected to decline 3 percent per year over a projected holding period of seven years. Vacancy will be at 7.5 percent, and the operating expense ratio (based on effective gross income) will be at 35 percent. The property is expected to appreciate at the rate of 2 percent per year. It will be financed using 75 percent debt at an interest rate of 8 percent, amortized over 15 years with monthly payments. Equity investors expect an 15 percent before tax yield. What is the value of this property? HINT: Use the Finance-Explicit Model.1 When you e-mail me the assignment, please make it clear what software package the assignment is in. I can usually access most types of files, if I know what it is in! If I have problems opening the file, I will contact you (so please keep a copy of the file!). Also please put your name in the name of the file!Page1of 23. A small shopping center is expected to produce net operating income of $24,980 in year 1. You expect NOI to increase by 4 percent per year over an expected holding period of seven years. Property value is expected to increase by 3.5 percent per year. The discount rate is 10 percent. Assume there will be no costs of sale. Estimate the value of the shopping center. HINT: Use the Net Operating Income and Net Selling Price Model.4. The following property information is provided…. operating income (NOI) Debt service (DS) Mortgage Amount Loan-to-value ratio (M)$95,000$62,500 $620,000 0.80Calculate the indicated debt coverage ratio.Calculate the mortgage constant, or mortgage capitalization rate (Rm)….ing the debt coverage ratio and the other information provided, calculate the overall rate (RO) for this property.The property you are attempting to appraise using the income approach has a NOI of $125,000. Can you use the above information (a through c) to estimate the value of this property? If so, what is it?What role does the loan-to-value ratio play in this valuation approach?5. First-year NOI for a long-term net lease is expected to be $75,000. Rent is escalating at a rate of 4 percent per year, but there is a two-year period between adjustments. Thus, the income for years 1 and 2 will be $50,000, increasing to $50,000 (1+.03)2 = $53,045 in years 3 and 4, and so on. The discount rate is 12 percent. Assuming beginning-of-year payments, estimate the value of the leased fee.Page2of 2