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A property has a projected year 1 NOI of $200,000. NOI is projected to grow by...

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, then by 2% per year for the subsequent 2 years at a 1% constant rate afterward. Given a required return of 13%, what is the value of the property today if you sell at the end of year 5?

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Answer #1

Value at the end of year 5 = present value at year 5 of future NOI from year 6 onwards. This is obtained using the pv of perpetual cash flow formula. PV = NOR/(r - g)

This is discounted to today to get the value of the property today.

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