Question

true or false?The value of the building and the NOI both grow at 10% per year for the next five years. You sell the property after year 5, and your selling expenses are 5% of the resale price. The interest rate on the mortgage loan is the cost of your debt. The average historical return of the stock market is the cost of your equity.

Answer 1

Answer:

True

Explanation:

The value of building and the NOI both grow at 10% for next 5 years. The interest on mortgage loan is cost of debt. The cost of is the return required by the lender of fund. The interest amount is payable on mortgage regardless of fund are used in a profitable project or not. The average historical returns of the stock market is cost of equity. The cost of equity is the rate of return required by the equity investors.