Swot Analysis Of Martgage

The indicated capitalization rate for this investment based on the information provided is 8.20% indicating the value of this property to be $7,317,073 or $7,320,000 rounded.

I base this conclusion on the following calculations:
• The mortgage constant is .085972 calculated using the following HP-12C keystrokes:
F Clx
1 PV
6 g i
20 g n
PMT
12 x
• The percent paid off on the mortgage after 5 years is 15.1004% calculated using the following HP-12C keystrokes:
F Clx
6 g i
20 g n
1 PV
PMT
5 g n
FV
ENTER
1 +
• The sinking fund factor used in this example is .134380 calculated using the following HP-12C keystrokes:
F Clx
1 FV
5 n
20 i
PMT

This information along with the given information is used in the Ellwood formula as follows:

Overall Rate = [.20 …show more content…
What is the indicated capitalization rate and value of this property if the income was level over the holding period but the property still appreciated 15% in value over the term? Please explain your answer.

The indicated capitalization rate for this property with a level income stream would be 8.58% yielding an estimated value of $6,993,007 rounded to $6,990,000. This is calculated utilizing the same formulas to answer question 1 but with an Ellwood formula denominator of 1 indicating an unchanging income stream. The math would be:

Overall Rate = [.20 - .70 (.20 + (.151004 X .134380) - .085972) - .15 X .134380] / 1

Working the formula results in the following equations:

Overall Rate = [.20 - .70 (.20 + .020292 - .085972) - .020157] / 1

Overall Rate = [.20 - .70 (.13432) - .020157] / 1

Overall Rate = [.20 - .094024 - .020157] / 1

Overall Rate = .085819 / 1

Overall Rate = .085819 Rounded to 8.58%

At this point property value is estimated using the I = R/V formula:

$600,000 = .0858 /