All of the following are typical "GIGO" mistakes in common application of the DCF method to real estate investment analysis except:
A) The growth rate in the rents is projected too high.
B) The level of required capital improvement expenditures, or the going-out cap rate, are projected too low.
C) The discount rate or going-in IRR is too high.
D) The going-in cap rate is projected too low.

Question

Quizplus · Accepted Answer

The going-in cap rate is the rate of return that an investor expects to earn on a property at the time of purchase. It is used to calculate the present value of the property's future cash flows. If the going-in cap rate is projected too low, the present value of the property will be overstated, which could lead to a bad investment decision.

All of the Following Are Typical "GIGO" Mistakes in Common