An office building is purchased with the following projected cash flows:

Question

-NOI is expected to be $180,000 in year 1 with 3 percent annual increases.
-The purchase price of the property is $820,000.
-100% equity financing is used to purchase the property
-The property is sold at the end of year 4 for $780,000 with selling costs of 6 percent.
-The required unlevered rate of return is 12 percent.

Calculate the unlevered net present value (NPV).

Answer 1

I had this question on one of my real estate principles exams and the correct answer, according to my professor, was $215,399.

Not sure how she arrived at this answer yet.