Valuation Review, Required Rates of Return and Capitalization Rates

Aug 06, 2012

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The Big Picture. . . Space Market:. Capital Market:. . VALUE. Supply:Construction CostsLand Availability. DemandPopulation GrowthJob GrowthIncome Growth . RENTAL RATES

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Valuation Review, Required Rates of Return and Capitalization Rates

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1. Valuation Review, Required Rates of Return and Capitalization Rates Module 2 introduces techniques used be real estate professionals to value income producing properties. Subsequent modules focus on using market research to derive the inputs needed to complete the valuation process. Module 2 introduces techniques used be real estate professionals to value income producing properties. Subsequent modules focus on using market research to derive the inputs needed to complete the valuation process.

2. The Big Picture�

Interest Rates and Bond Valuation

Interest Rates and Bond Valuation. Chapter 7. Key Concepts and Skills. Know the important bond features and bond types Understand bond values and why they fluctuate Understand bond ratings and what they mean Understand the impact of inflation on interest rates

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Risk and Rates of Return

Risk and Rates of Return. Besley: Chapter 5 Pages 179-198. Risk and Investing. The Rules: Investing is risky. Risk is manageable. Types of Risk: Diversifiable Risk – Can be eliminated through diversification. Nondiversifiable Risk. Defining and Measuring Risk.

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Required Rates of Return and Capitalization Rates

Objectives. Review the valuation methodologies used to value an income producing property.Understand the pros and cons of using direct capitalization versus discounted cash flow and vice versaUnderstand the theory behind direct capitalization using a cap rates.Understand how CAPEX is handled in

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INCOME CAPITALIZATION: RATES AND TECHNIQUES

Chapter 14. INCOME CAPITALIZATION: RATES AND TECHNIQUES. CHAPTER TERMS AND CONCEPTS. Direct capitalization technique Direct comparison method Discount rate Discounted cash flow (DCF) Equity dividend rate Equity residual technique Equity yield rate Going-in OAR Going-out OAR

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Risk and Rates of Return

Chapter 8. Risk and Rates of Return. Historical Risk and Return Info. Based on annual returns from 1926-2004 Avg. Return Std Dev. Small Stocks 17.5% 33.1% Large Co. Stocks 12.4% 20.3% L-T Corp Bonds 6.2% 8.6% L-T Govt. Bonds 5.8% 9.3% U.S. T-Bills 3.8% 3.1%.

504 views • 31 slides

Risk and Rates of Return

Risk and Rates of Return. Managerial Finance I Keldon Bauer, PhD. Introduction. We have focused some attention on expected return. But how does risk alter the value of assets?. Defining/Measuring Risk. Risk is often though of as the “possibility of loss or injury.”

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Interest Rates and Bond Valuation

Interest Rates and Bond Valuation. RWJ-Chapter 7. Valuation of Bonds and Stocks. First Principles: Value of financial securities = PV of expected future cash flows To value bonds and stocks we need to: Estimate future cash flows: Size (how much) and Timing (when)

758 views • 41 slides

Interest Rates and Bond Valuation

Interest Rates and Bond Valuation. Key Concepts and Skills. Know the important bond features and bond types Understand bond values and why they fluctuate Understand bond ratings and what they mean Understand the impact of inflation on interest rates

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Risk and Rates of Return

Chapter 8. Stand-Alone Risk Portfolio Risk Risk and Return: CAPM/SML. Risk and Rates of Return. Investment Returns. The rate of return on an investment can be calculated as follows:

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Interest Rates and Bond Valuation

Chapter Seven. Interest Rates and Bond Valuation. Prepared by Anne Inglis, Ryerson University. Key Concepts and Skills. Know the important bond features and bond types Understand bond values and why they fluctuate Understand bond ratings and what they mean

614 views • 42 slides

Risk and Rates of Return

Risk and Rates of Return. Stand-alone risk Portfolio risk Risk & return: CAPM / SML. Investment returns. The rate of return on an investment can be calculated as follows: (Amount received – Amount invested) Return = ________________________ Amount invested

761 views • 55 slides

Risk and Rates of Return

Risk and Rates of Return. Chapter 6. Interest Rate. Interest rate represents the cost of money It is the opportunity cost of money: It shows the return lost from not investing in a comparable risk investment. It is expected to compensate the investor for the time, inflation, and risk.

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Risk and Rates of Return

Risk and Rates of Return. Stand-alone risk Portfolio risk Risk & return: CAPM / SML. What are Investment Returns. Investment returns measure the financial results of an investment. Returns may be historical or prospective (anticipated). Returns can be expressed in: Taka

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Risk and Rates of Return

Risk and Rates of Return. What does it mean to take risk when investing? How are risk and return of an investment measured? For what type of risk is an average investor rewarded? How can investors reduce risk?

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5.1 Rates of Return

5.1 Rates of Return. 5- 1. Measuring Ex-Post (Past) Returns. $8. $45. $52. (52 - 45 + 8) / 45 = 33.33%. An example: Suppose you buy one share of a stock today for $45 and you hold it for one year and sell it for $52. You also received $8 in dividends at the end of the year.

355 views • 24 slides

Rates of Return

Rates of Return. Construction Engineering 221 Economic Analysis. Rates of Return. ROR stand for Rate of return- it is the effective annual interest rate earned on an investment

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Risk and Rates of Return

Risk and Rates of Return. Defining and Measuring Risk. What is risk in the financial world What are some examples of risky investments? What security is usually considered to be a risk free investment? . Probability Distributions.

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Risk and Rates of Return

Chapter 8. Risk and Rates of Return. Stand-Alone Risk Portfolio Risk Risk and Return: CAPM/SML. What is investment risk?. Two types of investment risk Stand-alone risk Portfolio risk Investment risk is related to the probability of earning a low or negative actual return.

532 views • 50 slides

Risk and Rates of Return

Risk and Rates of Return. Return. Risk. RISK. How to measure risk (variance, standard deviation, beta) How to reduce risk (diversification) How to price risk (security market line (SML) , CAPM). For a Treasury security, what is the required rate of return?. Required

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Multiple Rates of Return

Multiple Rates of Return.

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Interest Rates and Rates of Return

Interest Rates and Rates of Return. 3. C H A P T E R. LEARNING OBJECTIVES. After studying this lesson, you should be able to:. Explain how the interest rate links present value with future value. 3.1.

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