The Student Handbook to T HE A PPRAISAL OF R EAL E STATE 1 Chapter 24 Discounted Cash Flow Analysis and Special Applications in Income Capitalization

Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter 24 2 Applications of Discounted Cash Flow Analysis (DCF)  Both DCF and direct capitalization require an estimate of next year’s net income.  Discounted cash flow requires more than one year’s estimate.  Several years’ estimates of income, vacancy, collection losses, and expenses are required.

Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter 24 3 Table 24.1 Discounted Cash Flow Analysis of a Small Retail Center

Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter 24 4 Table 24.1 Discounted Cash Flow Analysis of a Small Retail Center, continued

Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter 24 5 Table 24.1 Discounted Cash Flow Analysis of a Small Retail Center, continued

Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter 24 6 Table 24.2 Calculating Net Present Value

Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter 24 7 Table 24.3 Calculating Net Present Value

Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter 24 8 Table 24.4 Payback Period

Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter 24 9 Table 24.5 Profitability Index

Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter Case Study: Analysis of an Office Building Investment

Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter Case Study: Analysis of an Office Building Investment, continued

Student Handbook to T HE A PPRAISAL OF R EAL E STATE Chapter Value Opinion – Case Study