We just signed a lease contract in a 200,000 SF office 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 office building, assuming that the building year 10 and the cap rate at that time is expected to be 10%? What is the implied cap rate at sold at the end of 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?

We just signed a lease contract in a 200,000 SF office 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 office building, assuming that the building year 10 and the cap rate at that time is expected to be 10%? What is the implied cap rate at sold at the end of 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?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 1P

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