A Property That Produces a First Year NOI of $80,000

question 28

Multiple Choice

A property that produces a first year NOI of $80,000 is purchased for $750,000.The NOI is expected to increase by 15% in the sixth year when some of the leases turnover.The resale price in year 10 is expected to be $830,000.What is the net present value of the property based on the 10-year holding period and a discount rate of 9.5%?

• A)$87,433
• B)$87,221
• C)$95,294
• D)$116,490

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Definitions:

Budgeted Production

An estimate of the number of units that should be produced in a period to meet anticipated sales.

Direct Labor Costs

Expenses associated with the wages and benefits of employees who are directly involved in the production of goods or services.

Budgeted Manufacturing Overhead

Budgeted manufacturing overhead is the estimated amount of indirect costs that are expected to be incurred in the manufacturing process during a specified period.

Direct Labor-hour

A measure of the total amount of time worked by employees directly involved in manufacturing a product or providing a service.