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A property has a projected year 1 NOI of $200,000.

NOI is projected to grow by 4% per year for the following 2


years, by 2% per year for the subsequent 2 years, and by a constant 1% per year afterwards.

• Given a required return of 13%, what is the value of the property?

g 4%
g 2%
g 1%

Required Return 13%

Year NOI Rounded


1 $200,000 $200,000
2 $208,000 $208,000
3 $216,320 $216,320
4 $220,646.40 $220,646
5 $225,059.33 $225,059

Terminal Value $1,894,246.58 $1,894,250 $227,309.59


$1,894,246.58
Required Return 13%

Year Cash Flow (Rounded)


1 $200,000 $200,000
2 $208,000 $208,000
3 $216,320 $216,320
4 $220,646 $220,646
5 $2,119,309 $2,344,368.33

Value of Property $1,775,409


y 4% per year for the following 2
afterwards.

$1,775,409

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