In doing a real estate proforma, you often have to determine a "terminal" (or "going-out") cap...

In doing a real estate proforma, you often have to determine a "terminal" (or "going-out") cap rate. Which of the following best describes what this is?

	a.	A rate of return you expect in the final year of ownership
	b.	An after tax "final" return calculated at the end of your proforma.
	c.	An internal rate of the return over the expected ownership period
	d.	A rate used in conjunction with expected future cash flow to derive a sales price

Expert Solution

Terminal capitalisation rate is the exit rate which will be used in order to determine the sales price of the property.

Terminal capitalisation rate is used to determine the sales value of the Asset and it is used to find out the value after ascertainment of the sales price after comparing with other similar properties.

All the other options are false.

Correct answer will be option (d) rate used in conjunction with expected future cash flows to derive sales price.

jeff jeffy answered 2 years ago

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