- CFA Exams
- CFA Level I Exam
- Study Session 15. Alternative Investments
- Reading 39. Private Real Estate Investments
- Subject 4. The income valuation approach
CFA Practice Question
Calculate the residual land value given the following information:
Annual growth rate = 2.5%
Capitalization rate = 12.5%
Construction costs for new building = 2,000,000
NOI year 1 = $360,000
Annual growth rate = 2.5%
Capitalization rate = 12.5%
Construction costs for new building = 2,000,000
A. 1,600,000
B. 1,000,000
C. 880,000
Explanation: 360,000/0.125 - 2,000,000 = 880,000.
User Contributed Comments 1
| User | Comment |
|---|---|
| siggarusfigs | The cap rate was r-g, so don't subtract g anymore. |