Use the direct capitalization approach to income valuation to calculate the market value of the warehousethat has been described below:Leasable space:Average rent:Expected annual rent growth:Other income:Expected annual growth in other income:Vacancy and collection losses:Operating expenses:Capital expenditures:Selling expenses:Discount rate:Going-in cap rate:Going-out cap rate:$3.13 million$2.93 million$2.19 million$219,378I50,000 square feet$5 per square foot per year5%$2 per square foot per year10%5% of potential gross income30% of effective gross income5% of effective gross income5% of future selling price10%7%7.5%

The given question pertains to the valuation of a warehouse using the direct capitalization…

Answered: Use the direct capitalization approach…

Use the direct capitalization approach to income valuation to calculate the market value of the warehouse that has been described below:

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter1: Introduction And Goals Of The Firm

Section: Chapter Questions

Problem 2.2CE

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Question

Use the direct capitalization approach to income valuation to calculate the market value of the warehouse
that has been described below:
Leasable space:
Average rent:
Expected annual rent growth:
Other income:
Expected annual growth in other income:
Vacancy and collection losses:
Operating expenses:
Capital expenditures:
Selling expenses:
Discount rate:
Going-in cap rate:
Going-out cap rate:
$3.13 million
$2.93 million
$2.19 million
$219,378
I
50,000 square feet
$5 per square foot per year
5%
$2 per square foot per year
10%
5% of potential gross income
30% of effective gross income
5% of effective gross income
5% of future selling price
10%
7%
7.5%

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