When calculating growth rate ,going-in cap or terminal cap should we use to calculate growth rate ?

CFA Level II Alternative Investments
#1

When calculating growth rate we should use growth rate to minus going-in cap or terminal cap rate ?

In reading 38 Private real estatet investment , problem 3 , he asked about the growth rate of Property 1 , I was given the terminal cap rate, the going-in cap rate and the discount rate , so which one should we use to substract from the discount rate ?

#2

Anyone can help ???

#3

Hi. I guess, you have to capitalize the last NOI without including growth rate, just divide by terminal cap rate. and then use the discount rate to discount until today.

#4

is there a definitive answer to this?

#5

If you’re discounting for the super normal growth phase, you use the growth rate obtained from the going in cap rate. For the terminal phase, you obviously use the growth rate obtained from the terminal cap rate.

#6

But the said question doesn’t specify whether it is super normal growth phase or terminal growth phase. What is one supposed to in such a situation?

QQ

#7

If there’s nothing specifically mentioned, you negate your required return from the going in rate.

#8

but why?