What would the estimated value for the property be now

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Ace Investment Company is considering the purchase of the Apartment Arms project. Next year's NOI and cash flow is expected to be $2,000,000, and based on Ace's economic forecast, market supply and demand and vacancy levels appear to be in balance. As a result, NOI should increase at 4 percent each year for the foreseeable future. Ace believes that it should earn at least a 13 percent return on its investment.

a. Assuming the above facts, what would the estimated value for the property be now?

b. What "going-in" cap rates should be indicated from recently sold properties that are comparable to Apartment Arms?

c. Assuming that in part (a) the required return changes to 12 percent, what would the value be now?

d. Assume results in part (c). What should the investor now be observing regarding the price of "comparable" sales? What market forces may be accounting for the differences in value between (a) and (c)?

Reference no: EM131326818

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