1. Suppose that you are trying to extract a capitalization rate from the market. You have obtained three comparable properties that have sold recently. Property #1 had a net operating income of $200,000 and sold for $1.6 million. Propery #2 had an NOI of $300,000 and sold for $2.1 million. Property #3 had an NOI of $400,000 and sold for $3.6 million. What is the market capitalization rate implied by these tranactions if you decide to weight all three comparables equally?
a. 12.6%
b. 12.2%
c. 11.1%
d. 7.9%
2. The company cost of capital for a firm with a 75/25 debt/equity split, 7% cost of debt, 15% cost of equity, and a 30% tax rate would be:
A. 7.43%.
B. 8.63%
C. 9.00%.
D. 13.80%.