(Answered) Question consider the projection of the reversion value in

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Question: Consider the projection of the reversion value in a multiyear DCF valuation.

a. What should be the typical expected relationship between the going-in cap rate and the going-out (reversion or terminal value) cap rate projected for the resale of the property at the end of the expected holding period (i.e., should you usually expect the going-out to be less than, equal to, or greater than the going-in)? Why?

b. How is your answer related to projected capital improvement expenditures during the holding period?

c. How is your answer related to the state of the property market at the time of purchase of the property at the beginning of the holding period (factors that affect the going-in rate)?

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