Suggested Solutions To Practical Exercises

Suggested solutions to
practical exercises
Chapter 3
1. £450,000 × 231.5/189.4 = £550,026.36

= value now if just kept pace with inflation
As actual value is £600,000 the real gain in value is £49,973.64
This is £49,973.64 × 100/£450,000 = 11.1 real percentage gain from original sum invested
2. Red Company dividend = 0.09 × 50p = 4.5 pence

Red Company yield = 4.5 × 100/72p = 6.25%
Blue Company dividend = 0.06 × £1 = 6 pence
Blue Company yield = 6 × 100/82p = 7.317%
Conclusion is that Blue Company is paying higher yield by 1.067%
3. £18,275 × 100/£400,000 = 4.569%
4. £5,244 × 100/(10,000 × £8.37) = 6.265%
5. £850,000 × 100/£17,000,000 = 5%
Chapter 4
1. (1+0.035)7 = 1.272279
2. 1.082512 = 2.589017
× £250 = £647.25
3. 1.058 × £3,000 = £4,432.37
4. 1.0510 × £22,500 = £36,650.13
5. Return on investment minus expected average inflation rate

= 4% – 2.6% = 1.4% real gain per annum
(1.0147 – 1) × £1,000,000 = £102,213.40 total real gain compared to just keeping pace with inflationary
increases
= £102,213.40 × 100/£1,000,000 = 10.22% total real gain on investment over the 7 years
6. 1.0619 × £17,000 = £51,435.19

1.0615 × £25,000 = £59,913.95
Total now = £111,349.14
For use in conjunction with Michael Blackledge, Introducing Property Valuation. Routledge: London.
© 2009 Michael Blackledge
2 Introducing Property Valuation: Suggested solutions to practical exercises
7. 1.082 × £6,500 = £7,581.60

× 1.075 = current value = £10,633.59
8 Amount of £1 for 7 years @ 4.5% = (1+0.045)7 = 1.36086

× £50,000 = £68,043
Amount of £1 for 3 years @ 4.5% =(1+0.045)3 = 1.141166
× £60,000 = £68,470
Therefore, total saved in account today = £136,513
9. 1.064 × 1.055 × £12,000 = £19,335.31

1.061 × 1.055 × £15,000 = £20,292.88
Total now in account = £39,628.19
10. 1.0455 × 1.0556 × £50,000 = £85,914.45

1.0556 × £70,000 = £96,518.99
In 6 years from now total saved = £182,433.44
11. To calculate future rents it is necessary to allow for compound interest at the estimated annual growth rate
to be added to the current market rent. This is found by using the Amount of £1 table. Thus future rents
will be:
In 5 years = £40,000 × A £1 in 5yrs @ 2%
= £40,000 × 1.1041 = £44,164 per annum
In 10 years = £40,000 × A £1 in 10yrs @ 2%
= £40,000 × 1.219 = £48,760 per annum
In 15 years = £40,000 × A £1 in 15yrs @ 2%
= £40,000 × 1.3459 = £53,836 per annum
12. PV is the inverse or reciprocal of the Amount of £1 formula. Thus if Amount of £1 (A) is found, the present
value for the same time period at the same interest rate will be 1/A or 1/(1+i)n.
13. 1/1.042526 = 0.338862
14. £8,500 × 1/1.0331 = £3,399.89
15. £220,000 × 1/1.0918 = £46,638.62
16. £42,000 × 1/1.068 = £26,351.32
17. PV for 8 years @ 5% = 1/(1+0.05)8 = 0.67839

× £100,000 = £67,839 needs to be invested now to reach the target amount required in 8 years from now.
18. PV of £80,000 in 4.5 yrs @ 4.85% = £80,000 × 1/(1.0485)4.5

= £80,000/1.237563 = £64,644.57
19. 28 months = 28/12 = 2.333 years

£11,500 × 1/1.042.333 = £10,494.43
20. The £300,000 will not be received for 2 years. Thus, its present value today at 9% all-risks yield will be:
£300,000 × PV £1 in 2 years @ 9%
= £300,000 × (1/1.092)
= £300,000 × 0.8417
= £252,510
SAY Sale Price now = £252,500
21. £450,000 × 1/1.072525 = £78,213.19
22. £10,500 × 1/1.0353 = £9,470.40

£8,000 × 1/1.0358 = £6,075.29
£12,000 × 1/1.03513 = £7,672.85
Total current value = £23,218.54
23. £78,000 × 100/£1,000,000 = 7.8%
24. £320,000 × 100/£4,000,000 = 8%
25. Amount of £1 per annum for 8 years @ 6% = (1.068 – 1)/0.06

= 9.897468
× £4,000 = £39,589.87 now in the account
26. 1.047 × £50,000 = £65,796.59

£5,000 × (1.046 – 1)/0.04 = £33,164.88
Total now in account = £98,961.47
Chapter 5
1. 0.04/(1.046 – 1) = 0.150762
2. £150,000 × 0.03/(1.0312 – 1) = £10,569.31 per annum
3. £50,000 × 0.045/(1.0457 – 1) = £6,235.07 per annum
4. £80,000 × 0.0325/(1.032515 – 1) = £4,223.09 per annum
5. £75,000 × 0.0425/(1.042518 – 1) = £2,858.01 per annum
6. Net of tax asf rate = 5.5% × (100 – 40)/100 = 3.3%

£45,000 × 0.033/(1.0339 – 1) = £4,375.66 per annum
7. £4,000 × (1.04756 – 1)/0.0475 = £27,037.05 saved so far

1.056 × £27,037.05 = £36,232.23 will have been saved in 6 years from now as a result of the money
already invested.
This leaves a shortfall of £100,000 – £36,232.23 = £63,767.77
£63,767.77 × 0.05/(1.056 – 1) = £9,374.96 per annum needs to be invested for next 6 years to reach target.
8. This requires use of two formulae or tables from Parry’s: the Amount of £1 and the Amount of £1 per
annum.
£2,500 invested per annum for the past 9 years @ 3.75% will now amount to: A £1 per annum for 9 yrs
@ 3.75% × £2,500
£2,500 × (1.0375 – 1)/0.0375 = £26,187.50
9
This sum will continue to attract interest at 4 per cent before tax per annum for the next 3 years. But,
investor pays income tax at 40 per cent. Thus net-of-tax (after deduction of tax) the investor will have 60
per cent of 4 per cent interest left, that is (100 – 40)/100 = 0.6 multiplier
0.6 × 4% = 2.4% net asf rate.
So, original investment in 3 years’ time will amount to:
£26,187.50 × A £1 for 3 yrs @ 2.4% = £28,118.61
Target sum required is £50,000, so ‘shortfall’ = £21,881.39
Annual investment per annum for next 3 years to meet this target is found by: annual sinking fund (asf) for
3 yrs @ 2.4% × £21,881.39
= 0.32546 × £21,881.39 = £7,121.51 per annum
Conclusion: the investor needs to invest £7,121.51 per year for the next 3 years in order to achieve her
target of a total sum of £50,000 in 3 years from now.
9. 5% × (100 – 28)/100 = 3.6% net asf rate

£60,000 × 0.036/(1.03611.333 – 1) = £4,380.96 per annum
10. (1.1315 × 0.13)/(1.1315 – 1) = £0.154742 per annum
11. £160,000 × (1.1118 × 0.11)/(1.1118 – 1) = £20,774.86 per annum
12. £250,000 × (1.07525 × 0.075)/(1.07525 – 1) = £22,427.67 per annum
13. £25,000 × (1.1255 × 0.125)/(1.1255 – 1) = £7,021.35 per annum
14. £190,000 × (1.08520 × 0.085)/(1.08520 – 1) = £20,077.48 per annum
15. £240,000 × (1.072522 × 0.0725)/(1.072522 – 1) = £22,149.16 per annum/12 = £1,845.76 per month
16. £3,852.74/((1.087510 × 0.0875)/(1.087510 – 1)) = £24,999.99

In other words a £25,000 loan.
17. First find the annual repayments: £15,000 × (1.126 × 0.12)/(1.126 – 1)

= £3,648.39 per annum
Then divide by the annuity £1 will purchase for 3 yrs @ 12% or multiply by the years purchase single rate
for 3 yrs @ 12%:
£3,648.39/((1.123 × 0.12)/(1.123 – 1)) = £8,762.82
or £3,648.39 × (1.123 – 1)/(1.123 × 0.12) = £8,762.82 to repay loan early
Chapter 6
1. YP perp number from each of these all risks yields is:

a. 5% = 20
b. 6% = 16.667
c. 7% = 14.286
d. 9% = 11.111
e. 11% = 9.091
f. 12.5% = 8
2. ARY% represented by the following YP perp numbers is:

a. 5 = 20%
b. 8 = 12.5%
c. 10 = 10%
d. 14.23 = 7%
e. 16.667 = 6%
f. 25 = 4%
3. £200,000 × 100/6.75 = £2,962,962.96

SAY = £2,963,000
4. £80,000 × 100/8.5 = £941,176.47

SAY = £941,200
5. £1,200,000 × 8/100 = £96,000 per annum
6. Freehold valuation
Net income (MR) = £150,000 p.a.
× YP perp @ 7.5% 13.333
Market value = £2,000,00
YP perp = 100/ARY
Client should offer £2 million for the freehold
7. Market rent (MR) = MV × ARY/100

Thus anticipated MR = £950,000 × 6.8/100
= £64,600 p.a.
8. Annual rate of return on property = All-risks yield (ARY)

ARY = MR × 100/MV
Thus: ARY = £175,000 × 100/£2.1M = 8.33%
9. (1.0915 – 1)/(1.0915 × 0.09) = 8.0606884
10. £60,000 × YP 3 yrs @ 7.25% = £156,743

SAY = £156,750
11. £87,500 × YP 2 yrs @ 11% = £149,846

SAY = £150,000
12. £200,000/£38,350 = YP for 10 yrs @ x% = 5.215123859

Look in Parry’s Tables for YP single rate and across the 10 years rows until a YP of this number or as close
to this as possible is found.
It will be seen that YP for 10 yrs @ 14% is 5.2161156 and is as close to number sought as to be of marginal
difference. Conclusion is that the investment has sold at a yield of close to 14 per cent.
13. YP single rate for 7 yrs @ 7.5%

= ((1.075)7 – 1)/((1.075)7 × 0.075) = 5.2966
Present value of £30,000 p.a. for 7 yrs @ 7.5% = £30,000 × 5.2966
= £158,898
SAY = £158,900
14. £2,000,000/YP 15 yrs @ 12% = £2M/6.8108645

= £293,648 per annum
15. 1/(1.136 × 0.13) = 3.694757903
16. £1,200,000/YP perp def 3 yrs @ 6% = £1,200,000/13.9936547

17. £400,000 × YP perp def 2 yrs @ 11% = £2,951,354

SAY = £2,9500,000
18. £60,000 × YP perp def 3 yrs @ 8% = £595,374

SAY = £595,000
19. YP 12 yrs @ 9% = 7.1607253

PV 4 yrs @ 9% = 0.7084252
YP × PV = 5.0728383 = YP for 12 yrs def 4 yrs @ 9%
20. YP single rate for 8 yrs @ 5%

= ((1.05)8 – 1)/((1.05)8 × 0.05) = 6.46321
PV for 2 yrs @ 5% = 1/(1.05)2 = 0.907029
PV = £25,000 p.a. × YP for 8 yrs @ 5% × PV for 2 yrs @ 5%

= £146,558
SAY = £146,500
21. YP 8 yrs @ 7% = 5.9712985

PV 3 yrs @ 7% = 0.8162978
£90,000 × 5.9712985 × 0.8162978 = £438,692
SAY = £438,500
22. YP 5 yrs @ 5% = 4.3294767

PV 4 yrs @ 5% = 0.8227024
£70,000 × 4.3294767 × 0.8227024 = £249,330
SAY = £249,500
23. YP 25 yrs @ 8% = 10.6747762

PV 4 yrs @ 8% = 0.73502985
£300,000/(10.6747762 × 0.73502985) = £38,235 per annum
24. asf = 0.032/(1.0325 – 1) = 0.187603009

YP = 1/(0.08+0.187603009) = 3.73687875
25. £10,000 × YP for 7 yrs @ 10% + 4% = £44,129

SAY = £44,100
26. £26,500 × YP for 4 yrs @ 12% + 5% = £75,282

SAY = £75,300
27. Net asf rate = 7% × 0.6 = 4.2%

£25,250 × YP 7 yrs @ 14% + 4.2% (tax 40%) = £72,197
SAY = £72,200
28. Net asf rate = 6% × 0.8 = 4.8%

£39,000 × YP for 5 yrs @ 12% + 4.8% (tax 20%) = £112,352
SAY = £112,400
29. Net asf rate = 4.25% × 0.72 = 3.06%

Leasehold valuation
Rent receivable (market rent)= £25,000 p.a.
Less rent payable= £20,000 p.a.
Net profit rent= £5,000 p.a.
× YP for 5 yrs @ 11.5% + 3.06% (tax 28%) 2.65752
Market value (assignment price) = £13,287
SAY = £13,300
30. Net profit rent = £6,500 p.a.

× YP for 6 yrs @ 12% + 3.5% & tax @ 21% 3.1923
31. YP for 6 yrs @ 9% + 3%= 4.0883492

PV for 3 yrs @ 9% = 0.77218348
YP for 6 yrs @ 9% + 3% (no tax) def 3 yrs = 3.15695571
32. YP for 10 yrs @ 11% + 3% (tax 30%)= 4.2623019

PV for 4 yrs @ 11% = 0.658730974
YP for 10 yrs @ 11% + 3% (tax 30%) def 4 yrs = 2.8077103
33. Net asf rate = 6% × 0.6 = 3.6%

YP for 4 yrs @ 9% + 3.6% (tax 40%)= 2.0625805
PV for 2 yrs @ 9%= 0.84167999
YP for 4 yrs @ 9% + 3.6% (tax 40%) def 2 yrs = 1.7360323 × £42,00 = £72,900
Chapter 7
1. a. 4.7665397
b. 4.9733123
c. 4.8369963
2. £25,000 × 4.1904252 = £104,761

SAY = £104,750
3. 100 × (1.02254 – 1) = 9.308%
4. a. £50,000 × 11.23136 = £561,568

SAY = £561,500
b. Net income= £125,000 p.a.
× YP perp @ 6.25% 16.620
= £2,077,533
SAY = £2.08 million
c. Net asf rate = 4% × 0.7 = 2.8%
Then using the formula, the YP can be calculated
£25,000 × YP for 5 yrs @ 9.5% + 2.8% (tax 30%) QIA = £70,371
SAY = £70,400
Chapter 8
1. a. 328 feet 1 inch (328’1”) or 109.36132 yards

b. 1,312 feet 4 inches (1,312’4”) or 437.4453 yards
c. 0.6213881 mile or 1,096.643 yards or 3,280 feet 11 inches (3,280’11”)
d. 3.1069409 miles or 5,468.2159 yards or 16,404 ft 6 in (16,404’6”)
2. a. 1,345.5328 square feet

b. 5,920.3444 square feet
c. 13,455.328 square feet
d. 123,789.02 square feet
e. 59.3032 acres
3. a. 3.81 metres or 38.1 centimetres or 3,810 millimetres

b. 5.0799997 metres
c. 7.0611997 metres
d. 6.4372 kilometres or 6,437.2 metres
e. 10.058125 kilometres
f. 44.25575 kilometres
g. 42.0888 hectares
h. 35.39625 cubic metres
Chapter 10
1. Estimated market rent = 850 × £75 = £63,750 p.a.

ARY = MR × 100/MV
ARY = £63,750 × 100/£820,000
ARY = 7.77%
2. Comparable site has space for 1.5 × 33 = 49.5 dwellings

Site value per dwelling = £2,000,000/49.5 = £40,404
Subject has space for 1 × 40 = 40 dwellings
@ £40,404 each = £1,616,161
SAY = £1.62 million
3. MR = ARY × MV/100
MR = 5.25 × £3,000,000/100
Market rent = £157,500 per annum
/788 sq.m. = £199.87
SAY = £200 per sq.m. p.a.
4. Comparable = £217,000/3,100 = £70 psm

Thus rental value of subject = £70 × 2,750 sq.m. = £192,500 p.a.
5. Comparables:£185,000/600= £308.33 per sq.m. p.a.

£265,000/900= £294.44 per sq.m. p.a.
Subject property’s floor area is mid-way between these two comparables and it appears the market has made
a quantum adjustment for their respective sizes. Thus adopt average of the two comparable rents:
750 × £301.39 per sq.m. = £226,040
SAY market rent of office = £226,000 per annum
6. Analysis of ITZA
Zone A 16.5 × 6 = 99 @ x = 99
Zone B 16.5 × 6 = 99 @ 0.5x = 49.5
Zone C 16.5 × 6 = 99 @ 0.25x = 24.75
Zone D 16.5 × 2 = 33 @ 0 as non NIA = 0
GF Ancillary 16.5 × 7 = 115.5 @ 0.05x = 5.775
LG Sales = 260 @ 0.1x = 26
Mezz Sales = 270 @ 0.125x = 33.75
1st Flr stock = 302 @ 0.04x = 12.08
TOTAL ITZA (sq.m.) = 250.855
@ £60,000/sq.m Market value= £15,051,300
SAY= £15 million
(on assumption VP value or property let at current market rent)
7. The return frontage will add to the value, but there is no single agreed approach on how this should be
assessed. It is possible to adopt a diagonal zoning method, working from the front corner of the unit and
using an average of the two zone A rental rates. The shop area will then be divided into triangular and
trapezium-shaped zones rather than rectangles. Alternatively, zoning can take place from both frontages
and highest figure per square metre adopted where zones overlap. However, this can lead to overvaluation.
More simply a percentage addition can be made as an ‘end allowance’ after the unit has been zoned in the
conventional fashion from the highest zone A rental frontage. It is also essential the ITZA rental used has
been derived in the same way as the method employed to value the subject premises.
Possible analysis of floor area (note 10 sq.m. deducted from zone C square measurements to allow for
non-NIA area):
Zone Frontage Depth Area Value ITZA

A 12.5 6 75 1 75
B 12.5 6 75 0.5 37.5
C 12.5 4 40 0.25 10
Ground floor ancillary 130 0.05 6.5
Mezzanine floor sales 105 0.125 13.125
1st floor ancillary 285 0.04 11.4
Lower ground sales 170 0.1 17
Lower ground ancillary 150 0.04 6
ITZA = 176.525
Add end allowance for
Return frontage @ say 10% 17.6525
Total ITZA = 194.2
Total rent p.a. SAY = £350,000
Rent psm ITZA p.a. = £1,802.47
This rental assessment would apply if the subject was on the same terms as the comparables. However, there
are differences that require further adjustment:
Discount for longer lease length of 21 years= – 5%
Increase for longer rent review periods = +3%
Reduction for restrictive user clause = – 10%
Total of these adjustments = – 12%
Reduce calculated rental by this amount = £350,000 × 0.88 = £308,000
Conclusion: recommended rent at review around £308,000 per annum.
8. A/E = cost of work/YP for number of years over which cost is to be ‘written off ’.
= £200,000/YP 20 yrs @ 11%
= £200,000/7.9633
Such a calculation is needed to calculate annual depreciation for accounts purposes or to find out what a
capital expenditure would equate to on an annual basis. It will be used when finding the ‘equivalent rent’
or ‘net effective rent’ for a property (as defined in RICS Red Book Valuation Information Paper No. 8:
The Analysis of Commercial Lease Transactions) from its ‘headline rent’. The headline rent is the sum
payable by the tenant, but this ignores the value of any ‘incentives’ incorporated in the lease agreement.
For comparison purposes and to find the ‘true’ market rent it is necessary to find the ‘equivalent’ rent (see
Chapter 16 for more information).
9. a. £175,000/YP for 7 yrs @ 6% = £31,348.63 per annum

b. £185,000/YP for 5.5 yrs @ 7.25% = £41,976.92 per annum
c. Net asf rate = 5% × 0.72 = 3.6%
£225,000/YP for 8 yrs @ 9% + 3.6% & tax @ 28% = £54,651.38 per annum
10. Annual equivalent = Capital sum/YP

= £125,000/YP for 15 yrs @ 8%+3%(tax 40%)
AE = £125,000/5.8958
Chapter 11
1. YP perp deferred 2 yrs @ 6.2% = 1/((1.062)2 × 0.062) = 14.3007

PV = £90 × 750 sq.m. × YP perp def 2yrs @ 6.2% = £965,297
SAY value = £965,000
2. Leasehold valuation
Net profit rent = £7,000 p.a
× YP for 4 yrs @ 9.50%
+ 3.0% & tax @ 40% 2.027
Market value (assignment price)= £14,188
SAY = £14,200
Freehold valuation
Term
Net income= £25,000 p.a.
× YP for 4 yrs @ 7.00% 3.387
£84,680
Reversion to market rent
× YP perp def 4 yrs @ 8.00% 9.188
= £294,012
Market value = £378,692
SAY = £379,000
• Freehold ARY on reversion assumed at 1.5 per cent lower than leasehold ARY as better investment
• Term yield reduced by 1 per cent to reflect additional security of income compared to market rent
3. Net asf rate = 5% × 0.72 = 3.6%. Say round down to 3.5%.

Leasehold valuation
× YP for 5 yrs @ 8.50%
+ 3.5% & tax @ 28% 2.907
SAY = £145,000
4. Net asf rate = 3.5% × 0.8 = 2.8%. SAY round down to 2.5% as next nearest in tables.
Leasehold valuation
× YP for 5 yrs @ 7.00%
+ 2.5% & tax @ 20% 3.249
SAY = £162,500
5. Analysis of the comparables:

Bannister House: £200/sq.m. but slightly smaller than subject although has 15 year term + 5-yearly rent
reviews
Coe House: £179.10/sq.m. but somewhat larger than subject and a straight 5 year term
Thus use say £195/sq.m. as current MR on subject property; giving market rent of £321,750 per annum
Freehold valuation of subject
Term
Net income £250,000 p.a.
× YP for 3 yrs @ 6.5% 2.648
= £662,119
Reversion to market rent £321,750 p.a.
× YP perp def 3 yrs @ 7.5% 10.733
= £3,453,281
SAY = £4,110,000
Initial yield = £250,000 × 100/(MV+purchase costs)

Assume costs @ 6% then initial yield = £250,000 × 100/£4,356,600
= 5.74%
Reversionary yield = £321,750/MV = 7.83%
Equivalent yield found from tables, formula or simple DCF/interpolation:
Years Income × YP = DCF
1-3 £250,000
4-perp £321,750
Calculated at 7.5% and say 6.5% and then results interpolated to find yield. Using conventional methods,
this can be achieved as follows:
Freehold valuation @ trial rate equivalent yield of 7.5%

Term
× YP for 3 yrs @ 7.5% 2.601
= £650,131
× YP perp def3 yrs @ 7.5% 10.733
= £3,453,281
SAY = £4,100,000
Freehold valuation at trial rate equivalent yield of 6.5%
Term
× YP for 3 yrs @ 6.50% 2.648
£662,119
× YP perp def 3 yrs @ 6.50% 12.736
= £4,097,853
SAY = £4,760,000
‘True’ or ‘Target’ MV found from above = £4.11 million

MV @ 7.5% yield = £4.1 million
MV @ 6.5% yield = £4.76 million
Difference between MVs at two trial rates = £0.66 million
Difference between target MV and
MV at higher trial rate = £0.01 million
Difference between the two trial rates = 1%
Thus equivalent yield = 7.5% – ((0.01 × 1%)/0.66) = 7.5% – 0.015%
= 7.48%
To prove this is correct, insert it back into a conventional valuation:
Freehold valuation
Term
× YP for 3 yrs @ 7.48% 2.601
£650,368
× YP perp def 3 yrs @ 7.48% 10.768
£3,464,447
SAY = £4,110,000
6. First, assess the current market rent for each property:

Unit 1 measures 1,000 sq.m.
Comparables indicate rentals of £55 to £60 per sq.m. for similar units. Quantum adjustments to allow for
differing sizes of units normally show higher rentals per sq.m. for smaller floorspaces. Thus adopt: £60 per
sq.m. for unit 1, £55 for unit 2 and £57.50 for unit 3.
Estimated market rents:
Unit 1 = £60,000 p.a.
Unit 2 = £110,000 p.a.
Unit 3 = £86,250 p.a.
Freehold valuation of Unit 1
Term
× YP for 1.5yrs @ 7.00% 1.379
£68,934
× YP perp def 1.5yrs @ 7.00% 12.907
= £774,422
SAY = £843,000
Note: term yield not reduced as term income only marginally ‘more secure’ than reversionary income (i.e.
rent in term is only £10,000 less and is still 83 per cent of market rent) so little difference in risk involved.
Term
× YP for 1yrs @ 7.00% 0.935
£93,458
Net income £110,000 p.a
× YP perp def 1yrs @ 7.00% 13.351
= £1,468,625
SAY = £1,562,000
Note: term yield not reduced as term rent only slightly ‘more secure’ than reversion being only £10,000
(approximately 9 per cent) lower.
Term
× YP for 0.33yrs @ 7.00% 0.315
£26,811
× YP perp def 0.33yrs @ 7.00% 13.970
= £1,204,937
SAY = £1,232,000
Note: no adjustment made to term yield as term rent is virtually same as reversionary rent and is thus
considered an equal risk rate.
As remaining term is so short, a simpler valuation would be:

Net income (market rent) = £86,250 p.a.
× YP perp @ 7% 14.286
SAY = £1,232,000
Total value of freehold interest in the estate held by ABC Investments =
Unit 1 MV = £843,000
Unit 2 MV = £1,562,000
Unit 3 MV = £1,232,000
Total market value SAY = £3.64 million
Leasehold valuation of XYZ’s interest in Unit 1
Rent receivable (market rent) £60,000 p.a.
Less rent payable £50,000 p.a.
Net profit rent £10,000 p.a.
× YP for 1.5yrs @ 8.25% + 3.0%
& tax @ 21% 1.087
Market value (assignment premium) = £10,870
SAY = £11,000
Leasehold valuation of RST’s interest in Unit 2
× YP for 1yrs @ 8.25% + 2.5%
& tax @ 28% 0.68
Market value (assignment premium) = £6,800
Leasehold valuation of DDP’s interest in Unit 3: The rent paid by the tenant is virtually the market rent and
there are only four months left to run on the lease, so the lease will have no saleable value. No valuation
required.
7. Analysis of comparables
The basis of this is to obtain a basic breakdown (£ per sq.m.). Then see how the comparable differs from
the subject property and adjust accordingly. The location of all the comparables is the same as the subject
building (as they are in the same road) and so no adjustment is needed for this aspect.
Features of subject property:

• Three-storey building, but this does not pose any special problem as there is a lift.
• Built 15 years ago – if not refurbished this would be viewed as an older building and could be more
difficult to let on the open market.
• Secondary office district so it is necessary to be looking for secondary ARYs not prime.
• Occupied by a PLC, so quite a good covenant, which means a slightly lower yield, could be accepted.
• Maintained to a good standard and has double-glazing, lift and central heating, so reasonably good for
its age.
• Ten years without review means that this is not so good from the landlord’s viewpoint as, although the
income may be quite ‘safe’, there would also be no increases to keep pace with inflation.
• IRL (internal repairing lease) terms mean the landlord has to pay for external and structural repairs,
insurance and management.
Analysis of Ascot House comparable

£85,000/945 sq.m = £89.95 per sq.m. p.a.
Differences to subject Adjustment
Built 4 years later Nil; similar age
25 yr term Add say 5% to this comparable rent as such a long term is not favoured by tenants
nowadays and the 10 year periodleft on the subject lease is more attractive
Rent reviews No rent reviews are mentioned, so assume they are standard 5-yearly. Add say 5%
to allow for no review on subject property which would lead to landlord seeking
higher rent to offset loss of income over next 10 years
Size/quantum Comparable is 26% larger; say add 3% for quantum for subject
FRI terms Nil; rent on review/lease renewal of subject will either be on FRI terms OR IRL
less outgoings which will = net FRI rental value anyway
This year letting date Nil; assume no significant change in market since let
Air conditioning Better than subject; say deduct 10%
Adjusted comparable: for subject, the rental value needs adjustment by say +3% = £92.65/sq.m.
Analysis of Sandown House comparable

£102,400/1,170 sq.m = £87.52 per sq.m. p.a.
5-storey building 2 storeys more than subject. Not a drawback providing the building has a lift. This
is not stated, but can be assumed
Built 4 years later Nil; similar age
Lease term Lease has 10 years unexpired; the same as the subject building, so nil adjustment
5-yrly RRs (assumed) Add say 5% to allow for no review for 10 years on subject
Size/quantum Comparable 56% larger; say add 5% for quantum for subject
FRI terms Nil; rent on review/lease. Renewal of subject will either be on FRI terms or IRL
less outgoings will = net FRI rental value anyway
This year rent review Nil; assume no significant movement of market since let
Adjusted comparable: for subject, the rental value needs adjustment by say –10% = £96.27/sq.m.
In addition, the freehold sale last week provides evidence of the ARY. The rental receivable by the landlord
is the market rent as at this year, so assume is up-to-date if market not changed since letting.Thus: ARY =
(£102,400/£930,700) × 100 = 11% i.e. this is the freehold ARY when MR is payable for this building.
Analysis of Chester Court comparable

£73,750/680 sq.m = £108.45 per sq.m. p.a.
Built 1 year later Nil; similar age
Lease term not known Assume as new lease this will be for currently common 5-year term for an older
building; as subject lease is twice this length and less attractive to a tenant say
deduct 5%
5-yrly RRs (assumed) Add say 5% to allow for no review for 10 years on subject
Size/quantum Comparable 28% smaller; say deduct 5% for quantum allowance on subject
IRI terms As rent on review/lease renewal of subject will either be on FRI terms or IRL
less outgoings will = net FRI rental value, theoutgoings on this comparable
need to be deducted; say deduct 15% (10% external & structural repairs + 5%
management)
Let this year Nil; current market evidence providing no significant change in market since let
Poor condition Subject is better; say add 10%
Adjusted comparable: for subject, the rental value needs adjustment by say –10% = £97.60/sq.m.
Summary of comparable analysis

All the above are only suggestions on how percentage adjustments could be allocated. There is considerable
room for differences in opinion on the percentages used and the method of analysis used.
Also quite a lot more information needs to be found on each comparable, if possible, to ascertain why the
figures differ between each building and what qualitative factors this may be due to – it is never possible to
have too much evidence!
Unadjusted comparables show: £89.95, £87.52 and £108.45. Straight average of these figures is £95.30/
sq.m. although one comparable is considerably out-of-line with the others and there is a temptation to
disregard this and just average the remaining two – but this would be wrong! Having made qualitative and
quantitative adjustments, the adjusted comparables are: £92.65, £96.27 and £97.60. These are a lot more
consistent and logical and the straight average of these is £95.50/sq.m. Two of the comparables are higher
than the strict average, thus the figure of £96.00/sq.m. will be adopted for the subject building.
market rent valuation = 750 sq.m. × £96.00 = £72,000 per annum
Capital valuations
The all-risks yields will need to be used in the calculations, based on any market evidence that can be
obtained. The best and most direct evidence is provided by the sale of Sandown House last week.Taking
account of this evidence and the location and secondary nature of property, etc., an ARY of 11% for the
freehold and 13% for the leasehold calculations can be adopted (i.e. 2% added to freehold for leasehold in
absence of any direct leasehold yield evidence).
a. Existing freehold valuation

Term
Gross income £70,500 p.a.
Less outgoings:
Ext/struct reps @ say 10% MR £7,200
Insurance £6,000
Management @ 5% rent £3,525
£16,725 p.a.
× YP for 10 yrs @ 10% 6.1445
£330,420
Reversion
× YP perp def 10 yrs @ 11% 3.2016
£230,515
Capital value = £560,935
SAY = £561,000
b. Existing leasehold valuation

Rent receivable (MR on FRI terms) £72,000 p.a.
Add outgoings £16,725 p.a.
Rent receivable on IRL terms £88,725 p.a.
× YP 10 yrs @ 13% + 3% (tax 28%) 3.982
= £72,565
SAY = £72,500
c. Freehold valuation with VP

Net income (MR) £72,000 p.a.
× YP perp @ 11% 9.0909
= £654,545
SAY= £654,500
Freehold with VP minus (present freehold + present leasehold)
= £654,500 - (£561,000 + £72,500) = £21,000
Thus there is a small potential ‘marriage value’ from the merging of the leasehold and freehold interests
(covered in Chapter 16). This is the release of potential latent additional value through the tenant purchasing
the freehold and then being in possession of a property that could sell for more than the combined total of
the present freehold and leasehold interests.
8. Valuation of head leasehold interest

Term
Rent receivable= £47,500 p.a.
Less rent payable= £ 1,500 p.a.
Net profit rent = £46,000 p.a.
× YP 2 yrs @ 11% + 4.5%
(tax 30%) 1.2368
= £ 56,893
Reversion
Rent receivable: 1,000sm @ £60 = £60,000 p.a.
Less rent payable= £ 1,500 p.a.
× YP 20 yrs def 2 yrs @ 12%
+ 4.5% (tax @ 30%) 4.8157
= £281,718
SAY = £338,500
Notes
• Term yield 1 per cent lower to reflect term rent receivable is much lower and more secure than reversion
rent.
• The subject property has a ‘standard’ office content of circa 10 per cent GIA. A much higher office
content could warrant a higher overall rental rate per sq.m. or a valuation on an ‘excess office’ basis,
where comparables have been obtained from buildings with approx. 10 per cent content. This ‘excess’
approach would be to value all office content in excess of 10 per cent at a higher rate per sq.m. (usually
1.5 or 2 times the standard industrial/warehouse rental rate).
Valuation of sub-leasehold interest

Rent receivable (FRI terms)= £60,000 p.a.
Less Rent payable (FRI terms)= £47,500 p.a.
× YP 2 yrs @ 12%+4.5% (tax 21%) 1.3532
SAY= £17,000
On next rent review, sublessee will pay MR and will have no profit rent; value of interest is thus over next
2 years only.
9. Head leasehold valuation

Term
Rent Receivable £225,000 p.a.
Less Rent Payable £25,000 p.a.
× YP for 4 yrs @ 8.00%
+ 2.5% & tax @ 28% 2.413
= £482,545
Reversion
Rent receivable £240,840 p.a.
× YP for 12 yrs @ 8.00%
+ 2.5% & tax @ 28% 5.535
× PV 4 yrs @8.00% 0.735
= £878,082
Market value (assignment price) = £1,360,627
SAY = £1,361,000
10. Comparable rent = £67.50 per sq.m. p.a. However, this property is considerably larger than the subject, so
adjust for quantum and adopt say £70 for subject premises: £70 × 1,300 = £91,000 per annum.
Freehold valuation
Term
× YP for 7 yrs @ 8.00% 5.206
£312,382
× YP perp def 7 yrs @ 9.00% 6.078
£553,112
SAY = £865,000
Equivalent yield approach: freehold valuation

Term
Net income = £60,000 p.a.
× YP for 7 yrs @ 8.91% 5.048
£302,891
× YP perp def 7 yrs @ 8.91% 6.175
£561,939
SAY = £865,000
Nominal equivalent yield = 8.91% (annually in arrear)
Hardcore or layer approach: freehold valuation

Hardcore
× YP perp @ 8.38% 11.933
£715,990
Top slice
× YP perp def 7 yrs @ 10.38% 4.826
£149,600
SAY = £865,000
Freehold valuation: quarterly in advance basis

Term
× YP for 7 yrs @ 8.45% 5.395
£323,714
× YP perp def 7 yrs @ 9.45% 5.953
£541,686
SAY = £865,000
Equivalent yield approach QIA: Freehold valuation

Term
× YP for 7 yrs @ 9.36% 5.260
£315,623
× YP perp def 7 yrs @ 9.36% 6.041
£549,767
SAY = £865,000
True equivalent yield = 9.36% (quarterly in advance)
The ARY has been found from annually in arrear analysis of comparables and must be reused in the same
way so that devaluation and revaluation are on the same basis. The yields used in each of the other valuations
should similarly be derived from analysis using the same approach as the valuation method. For example, a
quarterly in advance yield must be found by both analysing and then valuing using this approach. The above
uses an adjusted QIA yield to find the same capital value calculated from the conventional approach. If the
same ARY was used as found from annually in arrear analysis, an overvaluation will result.
Freehold valuation: quarterly in advance basis but using unadjusted annually in arrear ARY
Term
× YP for 7 yrs @ 8.00% 5.464
£327,851
× YP perp def 7 yrs @ 9.00% 6.416
£583,890
SAY = £912,000
11. An insurance assessment is needed to find the annual premiums that will be payable:
Site clearance and preparation SAY £30,000

Construction costs: 1,550 × £1300 £2,015,000
Professional fees @ say 12% costs £241,800
= £2,286,800
Cost of alt accom for say 2 yrs rebuilding
period for 1,220 sq.m. @ £130 psm MR £158,600
£2,445,400
Plus allowance for inflation @ say 3% £ 73,362
Insurance sum £2,518,762
@ 35p per £100 = £8,816 p.a. premium
Freehold valuation
Term
Gross income £110,000 p.a.
Less outgoings:
Repairs & decs @ 5% MR = £7,930
Insurance = £8,816
Management @ 4% rent= £4,400
= £21,146 p.a.
× YP for 5 yrs @ 5.50% 4.270
£379,432
× YP perp def 5 yrs @ 6.50% 11.229
£1,780,909
SAY = £2,160,000
Notes:
• Rent will be increased to MR in 5 years’ time when lease expires.
• Rent on reversion can be taken to FRI basis as even if relet on internal repairing terms the net figure after
deduction of outgoings should equal FRI MR.
• ARY on term reduced by 1 per cent as term income lower than reversionary income and thus more
‘secure’.

Rent receivable (market rent on FRI terms) = £85,000 p.a.
Add outgoings = £9,550 p.a.
Market rent on existing lease terms = £94,550 p.a.
Less rent payable = £55,000 p.a.
× YP for 4 yrs @ 10.00%
+ 3.0% & tax @ 28% 2.315
SAY = £92,000
Freehold valuation
Term
Gross income = £55,000 p.a.
Less outgoings:
Insurance @ 3% MR = £2,550
Management @ 5% rent = £2,750
= £9,550 p.a.
× YP for 4 yrs @ 7.50% 3.349
= £152,227
× YP perp def 4 yrs @ 8.50% 8.489
= £721,574
SAY = £874,000
13. When comparables and subject property to be valued are on different lease terms, adjustments must be
made to bring them all on to a common basis, otherwise the comparison is not like-with-like. It is usually
simpler to convert everything to FRI (full repairing and insuring) terms, as these are the most common.
a. The landlord will view the rent collected as not net and need to deduct outgoings from it – for IRT this
will be external and structural repairs/decorations, insurance and management.
b. From the tenant’s viewpoint it is necessary to consider what the building is worth if it was sublet at
MR on IRT. A prospective tenant would be prepared to pay more than the MR calculated on FRI
terms since they are not responsible for some of the matters a tenant on FRI would be. That is they are
‘saving’ money on not having to pay out for those outgoings and this would be reflected in them being
prepared to pay more rent in the first place. This can be equated to the MR on FRI terms PLUS the
value of the outgoings they are NOT responsible for, which are those the landlord IS responsible for
summarised above. Once this is done the remaining figure will be the MR on IRT basis. Even better, of
course, is to find comparables also let on IRT basis and then it is a more straightforward comparison!
14. Valuation of leasehold interest in high street shop

Rent receivable (market rent on FRI terms) £70,000 p.a.
Add outgoings
Insurance @ 3% MR= £2,100
Management @ 5% rent = £2,500
£8,100 p.a.
Market rent on existing lease terms £78,100 p.a.
× YP for 4 yrs @ 7.50%
+2.5% & tax @ 28% 2.442
SAY = £69,000
Notes:
• ‘Outgoings’ are added back to bring comparable value in line with internal repairing only terms as under
existing lease.
• Spot figures or assumptions on percentage of rental value need to be adopted as no other evidence
available.
Chapter 12
1. Equated yield approach: freehold valuation

Assumed annual rental growth rate = 3.00%
Equated yield (annually in arrear) = 10.00%
True equated yield (quarterly in advance) = 10.66%
Years Income p.a. PV factor DCF

1 to 5 £80,000 3.791 £303,263
6 to 10 £92,742 2.354 £218,294
11 to 15 £107,513 1.462 £157,132
16 to 20 £124,637 0.907 £113,106
21 to 25 £144,489 0.563 £81,416
26 to perp* £167,502 1.231 £206,130
GPV = £1,079,342
SAY = £1,080,000
* Income capitalised @ ARY of 7.5% found from formula in Secton 12.4 to reflect continued future rental growth but then discounted
at equated yield.
2. Equated yield approach: freehold valuation


1 to 3 £420,000 2.531 £1,063,144
4 to 6 £452,294 1.955 £884,065
7 to 9 £487,071 1.509 £735,150
10 to 12 £524,522 1.165 £611,320
13 to 15 £564,853 0.900 £508,347
16 to perp* £608,285 4.128 £2,511,240
GPV = £6,313,265
SAY = £6,316,000
* Income capitalised @ ARY of 6.65% found from Formula 2.1 to reflect continued future rental growth but then discounted at
equated yield.
3. a. Using formula in Section 12.4, implied annual rental growth = 2.29% per annum.
b. Using equated yield formula the all risks yield = 5.86%.
Term
× YP for 3 yrs @ 7.00% 2.624
£131,216
x YP perp def 3 yrs @ 8.00% 9.923
£744,218
SAY = £875,000
Equated Yyeld approach: freehold valuation


1 to 3 £50,000 2.465 £123,256
4 to 8 £81,955 2.774 £227,347
9 to 13 £95,008 1.684 £159,979
14 to 18 £110,140 1.022 £112,574
19 to 23 £127,682 0.620 £79,216
24 to perp* £148,019 1.258 £186,164
GPV = £888,537
SAY = £889,000
* Income capitalised @ ARY to reflect continued future rental growth but then discounted at equated yield.
Shortcut DCF valuation

Current rent= £50,000 p.a.
× YP for 3 yrs @ 10.5% 2.4651235
= £123,256
plus
Market rent = £75,000 p.a.
× A £1 for 3 yrs @ 3% 1.092727
= £81,955
× YP perp @ 8% 12.5
× PV for 3 yrs @ 10.5% 0.7472316
= £765,492
SAY = £889,000
The three appraisals produce slightly different values, but a variation of £14,000 at this value level is
comparatively small. Assume final value adopted is around mid-way between the conventional and DCF
valuations, say at £880,000, and then the variation between the appraisals is less than 1.6 per cent.
5. Term
× YP for 2 yrs @ 7% 1.808
£130,177
× YP perp def 2 yrs @ 8% 10.717
£900,206
SAY = £1,030,000
Assumed annual rental growth rate = 3%
Equated yield = 10.5% (annually in arrear)

1 to 2 £72,000 1.724 £124,125
3 to 7 £89,116 3.065 £273,170
8 to 12 £103,309 1.861 £192,224
13 to 17 £119,764 1.129 £135,264
18 to 22 £138,839 0.686 £95,182
23 to perp £160,953 1.390 £223,686
GPV = £1,043,651
SAY = £1,044,000
Again, there is some relatively small variation in values between the different approaches. The difference of
£14,000 is not too significant at this value level (less than 1.36 per cent of lowest value found).
Conclusion: freehold market value is around £1.037 million.
6. The two open market comparables need to be analysed to arrive at the estimated market rent (MR) for the
subject building now.
Macduff House = £300000/1500sq.m. = £200/sq.m. p.a.
Macbeth House = £575000/3200sq.m. = £179.69/sq.m. p.a.
Interpolating between these figures to take into account ‘quantum adjustment’ as floor area of subject
property is 2,200 sq.m., an estimated MR of £191.60/sq.m. is taken. With 10 years until rent review on the
subject property, against five-yearly pattern on comparables, it is possible to argue that a small increase in
this amount could be used.
Note when current lease expires, it is assumed building will be relet on ‘normal’ five-yearly rent reviews and
this is reflected in the DCF analysis.
Market rent of subject building = 2200 × £191.60 = £421,520
SAY = £421,500 p.a.
a. Freehold valuation
Term
× YP for 3 yrs @ 7.00% 2.624
£839,781
× YP perp def 3 yrs @ 8.00% 9.923
£4,182,702
SAY = £5,022,000
b. Equivalent yield approach: freehold valuation

Term
× YP for 3 yrs @ 7.98% 2.578
£824,969
× YP perp def 3 yrs @ 7.98% 9.953
£4,195,515
SAY = £5,022,000

Nominal equivalent yield = 7.98% (Annually in arrear)
True equivalent yield = 8.39% (Quarterly in advance)
Equated yield approach: freehold valuation
c. Years Income p.a. PV factor DCF

1 to 3 £320,000 2.479 £793,278
4 to 8 £453,931 2.821 £1,280,609
9 to 13 £513,581 1.737 £892,323
14 to 18 £581,070 1.070 £621,767
19 to 23 £657,427 0.659 £433,244
24 to perp* £743,819 1.344 £1,000,031
GPV = £5,021,252
SAY = £5,022,000
Term
× YP for 3 yrs @ 6% 2.673
= £668,253
× YP perp def 3 yrs @ 7% 11.661
= £3,498,419
SAY = £4.2 million
Equivalent yield approach: freehold valuation

Term
× YP for 3 yrs @ 6.95% 2.627
= £656,679
× YP perp def 3 yrs @ 6.95% 11.762
= £3,528,532
SAY = £4.2 million
Nominal equivalent yield = 6.95%

True equivalent yield = 7.26% (quarterly in advance)
Hardcore or layer approach: freehold valuation

Hardcore
× YP perp @ 6.70% 14.925
= £3,731,343
Top slice
x YP perp def 3 yrs @ 8.70% 8.949
= £447,468
SAY = £4.2 million
Hardcore or layer approach using equivalent yield:

Freehold valuation
Hardcore
× YP perp @ 6.95% 14.388
£3,597,122
Top slice
× YP perp def 3 yrs @ 6.95% 11.762
£588,089
SAY = £4.2 million
Equated yield approach: freehold valuation

Annual rental growth rate = 3 %; equated yield = 9.6 %

1 to 3 £250,000 2.504 £626,117
4 to 8 £327,818 2.909 £953,635
9 to 13 £380,031 1.839 £699,062
14 to 18 £440,560 1.163 £512,447
19 to 23 £510,730 0.736 £375,649
24 to perp* £592,076 1.735 £1,027,157
GPV = £4,194,067
SAY = £4.2 million
Chapter 13
1. 5,120 × £2,000 = £10,240,000

1,500 × £200 = £300,000
800 × £120 = £96,000
Total construction costs = £10,636,000
2. a. Zone A = 8 × 6 = 48 sq.m. @ £2,000 = £96,000

Zone B = 8 × 6 = 48 sq.m. @ £1,000 = £48,000
Zone C = 8 × 4 = 32 sq.m. @ £500 = £16,000
Grnd flr ancillary = 8 × 4 = 32 sq.m. @ £100 (1/20) = £3,200
1st floor sales = 80 sq.m. @ £200 (1/10) = £16,000
1st floor ancillary = 80 sq.m. @ £80 (1/25) = £6,400
Market rent per shop = £185,600 p.a.
GDV:
Offices MR= £562,500 p.a.
× YP perp @ 6% 16.666
= £9,374,999
Shops MR = £2,227,200 p.a.
× YP perp @ 5.25% 19.0476
= £42,422,814
= £51,797,813
GDV SAY = £51.75 million
b. Letting fees @ 10% of MR = £278,970

Sales fees @ 3% GDV = £1,552,500
3. a. ((1.07)2 – 1) × £15M/2 = £1,086,750

b. ((1.075)2 – 1) × £15M/2 = £1,167,188
c. ((1.08)2 – 1) × £15M/2 = £1,248,000
d. ((1.0825)2 – 1) × £15M/2 = £1,288,547
e. ((1.09)2 – 1) × £15M/2 = £1,410,750
4. a. ((1.07)1.75 – 1) × £11.5M/2 = £722,759

b. ((1.075)2.25 – 1) × £11.5M/2 = £1,016,076
c. ((1.08)1.667 – 1) × £11.5M/2 = £787,102
d. ((1.0825)2.833 – 1) × £11.5M/2 = £1,447,839
e. ((1.0775)3.083 – 1) × £11.5M/2 = £1,487,862
5. £5,000,000 × PV 2.25 yrs @ 8% = £5,000,000 × 0.841 = £4,205,005

£4,205,005/1.05 = £4,004,767
Site value SAY= £4 million
6. £3,250,000 risk and profit = 20.96% GDV

= 26.53% costs
7. See example residual method valuation illustrated below:
Freehold industrial development
Gross Development Value:

Market Rent = £807,500
x YP perp 16.000
= £ 12,920,000
SAY = £ 12,920,000
Less Costs of Development:

Compensation to site's existing occupiers = £ -
Demolition of existing buildings = £ -
Site clearance/remediation/preparation = £ 70,000
Other initial/miscellaneous/contingency costs = £ 200,000
Construction costs:
industrial/distribution units
constructable floor area in sq.m. = 9500 m ²
@ construction cost per sq.m. = £775.00 /m ²
Costs = £ 7,362,500
surface parking and loading areas
Costs = £ 350,000
landscaping
constructable floor area in sq.m. = 0 m²
Costs = £ 90,000
Arch, QS & other prof. fees as % of const. costs 12 % £ 936,300
Agents & Legals on letting as % of MR 10 % £ 80,750
Agents/Legals on investment sale as % of GDV 3 % £ 387,600
Finance charges on costs over devt. period @ 6.25 % £ 451,112
Developer's Risk & Profit:
as % of costs £ 1,489,239
as % of GDV £ 1,292,000
SAY = £ 1,390,000
Total Costs = £ 11,318,262
Balance = £ 1,601,738
Less Site Purchase finance over devt. period @ 6.25 % = £ 139,231
= £ 1,462,507
Less site purchase costs @ 6 % = £ 82,783
Site Value = £ 1,379,724
SAY = £ 1,370,000
= per hectare: £ 796,512
8. First analyse retail ITZA and market rents for each shop unit.
Zone Front Depth Area Value ITZA
A 7.5 6 45 1 45
B 7.5 6 45 0.5 22.5
C 7.5 5 37.5 0.25 9.375
1st F Ancillary 130 0.02 2.6
Total ITZA = 79.5
Total Rent = £143,000 p.a.
Rent psm ITZA p.a. = £1,799.31
Then provide residual valuation using all information provided and making reasoned assumptions where
necessary as illustrated below:
Offices

Market Rent = £528,000
x YP perp 14.286
= £ 7,542,857
SAY = £ 7,540,000
Retail units

Market Rent = £1,430,000
x YP perp 16.667
= £ 23,833,333
SAY = £ 23,830,000
Less Costs of Development:

Compensation to site's existing occupiers = £ 150,000
Planning fees = £ 15,000
Site clearance/remediation/preparation = £ 70,000
Promotion and marketing costs = £ 100,000
Other initial/miscellaneous/contingency costs = £ 500,000
Construction costs:
Offices
@ construction cost per sq.m. = £1,900.00 /m ²
Costs = £ 8,930,000
Retail units
constructable floor area in sq.m. = 3100 m²
@ construction cost per sq.m. = £1,500.00 /m ²
Costs = £ 4,650,000
Arch, QS & other prof. fees as % of const. costs 13 % £ 1,765,400
Agents & Legals on letting as % of MR 10 % £ 195,800
Finance charges on costs over devt. period @ 7.75 % £ 1,142,582
Developer's Risk & Profit:
as 15% of costs £ 2,627,817
as 10% of GDV £ 3,137,000
SAY = £ 2,880,000
Total Costs = £ 20,398,782
Balance = £ 10,971,218
Less Site Purchase finance over devt. period @ 7.75 % = £ 1,343,472
= £ 9,627,746
Less site purchase costs @ 7 % = £ 629,853
Site Value = £ 8,997,893
SAY = £ 9,000,000
Conclusion is that proposed purchase price of £7 million is reasonable.

a. £4,880,000 would be total available for risk and profit
b. This equals 27.86% of the costs.
c And 15.56% of the total GDV.
Chapter 14
1. Gross receipts £225,000

Less purchases (£85,000)
Gross profit £140,000
Less working expenses £65,000
Net profit £75,000
Less proprietor’s share @ 50% £37,500
Balance= £37,500
Return on proprietor’s capital:

Fixed assets £35,000
Stock £7,000
Cash £4,500
Total capital £46,500
Interest @ say 5% 0.05
= £2,325
Remaining balance for rent + rates = £35,175
Less business rates = (£9,000)
Rental value= £26,175 p.a.
Value of land and buildings

Rental value= £26,175 p.a.
× YP perp @ 8% 12.5
Capital value= £327,187
SAY = £ 327,000
Value of ‘goodwill’ = share × 1.5

= £37,500 × 1.5 = £56,250
Total value could be assessed as land and buildings, goodwill and fixed assets = £418,250
As a check, compare to gross receipts: £418,250/£225,000 = 1.858 YP
This is within range of other comparable properties, but on higher side of figures achieved, so may wish
to consider reducing multiplier on goodwill and/or increase ARY as at 1.5 YP total value would only be
£337,500.
2. Gross receipts:
Room lettings
Average occupancy rate = 66%
Weekly charge per room = £450
Total receipts from room lettings = £930,150
Fitness room/gymnasium lettings £9,600
Functions rooms lettings £62,400
Restaurant/coffee shop/bar takings £69,600
Total gross receipts: £1,071,750

Less Purchase of new equipment £60,000
Less general working expenses £416,000
Net Profit £595,750
Less proprietor’s share including
interest on proprietor’s capital £327,663
Rent + Rates = £268,088
Less estimated annual rates £43,000
Market rental value of completed

development = £225,088 p.a.
Market rent SAY = £225,000 p.a.

× YP perp @ 8% 12.5
Market value (capital value) = £2,812,500
(of completed development)
SAY = £2,800,000
SAY land value = 40 per cent of completed development value as city centre site (but comparables needed
to support this), then market value of site = £1,120,000 (/0.3) = £ per ha: £3,733,333
SAY = £3,700,000 per hectare
Chapter 15
1. Depreciated replacement cost valuation

Construction costs: 1,000 sq.m @ £900 psm = £900,000
Site works; say = £60,000
Allowance for any necessary adjustments &
additions say = £50,000
= £1,010,000
Date of replacement assumed as valuation date (now)
and no allowance to cost needed for this aspect
Allowance for professional fees

and statutory fees say @ 12% = £121,200
Allow for short-term finance over half the
construction period @ say 7% = £87,668
Gross Replacement Cost (excluding VAT) = £1,218,868
Say useful life of building is 60 years total. Therefore, unexpired useful life is 30 years. Say allow 50% for
simple ‘straight-line’ depreciation to reflect age, obsolescence and existing repairs required of £125,000.
Thus 50% of £1,218,868 + site value = current capital value
50% of GRC = £609,434
Site value: 0.182 ha @ say £2.5M per ha = £455,000
(from comparables)
= £1,064,434
Conclusion: asset value of existing building = SAY £1.064 million.
Chapter 16
1. YP single rate for 4.5 yrs @ 6%

= ((1.06)4.5 – 1)/((1.06)4.5 × 0.06)
= 3.84417
PV for 0.5 yrs @ 6%
= 1/(1.06)0.5
0.971286
PV = £50,000 p.a. × YP for 4.5 yrs @ 6% × PV for 0.5 yrs @ 6%
= £186,689
SAY = £186,700
2. Calculation of MR on FRI terms disregarding value of improvements.
From landlord’s viewpoint

MR on IRT= £25,000 p.a.
Less outgoings:
Repairs @ say 5% MR = £1,250 p.a.
Insurance @ say 2.5% MR = £ 625 p.a.
Management @ say 6% rent = £1,500 p.a.
= £ 3,375 p.a.
MR on FRI terms (excl imps) = £21,625 p.a.
Note: external and structural repairs only as tenant responsible for internal repairs.
From tenant’s viewpoint

MR (improved) on FRI terms = £26,000 p.a.
Less Annual equivalent of improvements:
£25,000/YP 25yrs @ 11%+3% (tax30%)
= £25,000/6.7032= £ 3,730 p.a.
MR on FRI terms (excl imps) = £22,270 p.a.
SAY parties prepared to split difference 50/50

Therefore agreed MR on FRI terms excluding
value of improvements = £21,950; SAY = £22,000 p.a.
Valuation of Grant’s present interest

Rent receivable IRT = £25,000 p.a.
Less rent payable IRT = £15,000 p.a.
× YP 3yrs @ 11%+3%
(tax 30%) 1.7477
Note: leasehold yield assumed as 1 per cent higher than freehold yield.
Valuation of Grant’s proposed interest

Term
Rent receivable (MR on FRI) = £26,000 p.a.
Less rent payable = £x p.a.
Net profit rent = £26,000 – x p.a.
× YP 5yrs @ 11%+3% (tax30%) 2.6380
= £68,588 – 2.638x
Reversion
Rent receivable (MR on FRI) = £26,000 p.a.
Net profit rent = £ 4,000 p.a.
× YP 20yrs @ 11%+3% (tax30%)
× PV 5yrs @ 11% 3.6371
= £14,548
Less cost of improvements = (£25,000)
Value = £58,136 – 2.638x
Assessment from tenant’s viewpoint

• Present interest should = Proposed interest
• Therefore: £17,477 = £58,136 – 2.638x
• Therefore: x (proposed rent) = £15,413 p.a.
• The maximum rent which the tenant would be prepared to offer under the new lease would be
£15,400 p.a.
Valuation of landlord’s present interest

Term
Less outgoings:
Repairs @ say 5% MR * = £1,250 p.a.
Mangmnt @ say 6% rent = £ 900 p.a.
= £ 2,775 p.a.
× YP 3yrs @ 9% 2.5313
= £ 30,945
Reversion
Less outgoings:
Repairs @ say 5% MR * = £1,250 p.a.
Mangment @ say 6% rent = £1,500 p.a.
= £ 3,375 p.a.
× YP perp def 3yrs @ 10% 7.513
= £162,468
* External and structural repairs only as tenant responsible for internal repairs
Valuation of landlord’s proposed interest

Term
Net income = £x p.a.
× YP 5yrs @ 9% 3.8896
= £3.8896x
Reversion 1
× YP 20yrs def 5yrs @ 9.5% 5.597
= £123,152
Reversion 2
× YP perp def 25yrs @ 10% 0.92296
= £23,997
Capital value = £147,149 + 3.8896x
Assessment from landlord’s viewpoint

• Present = proposed values
• Therefore: £193,413 = £147,149 + 3.8896x
• Therefore: x (rent required) = £11,894 p.a.
• Landlord requires a minimum rent under the new lease of SAY £12,000 p.a.
Conclusions
Difference between tenant’s and landlord’s figures = £15,400 – £12,000 = £3,400.
Tenant can afford to pay more than the landlord requires, so the deal is viable.
The exact figure agreed will depend on the bargaining power and negotiating ability of the two sides.
However, after negotiation, say a 50/50 split of the difference between the parties is agreed, then a rental
of around £13,700 p.a. is likely to be mutually acceptable under the new lease.
SAY agreement is reached at £13,700 p.a.
Again in this instance, both landlord and tenant are better off at the end of the surrender and renewal than
they were at the start.
Alternatively, if the rent under the new lease was fixed in advance at £12,000 p.a. and a premium payable,
the calculation would be as follows.
From tenant’s viewpoint:

Leaseholder’s proposed interest = £58,136 – 2.638x
If x = £12,000 then proposed interest = £26,480
Present interest = £17,477
Therefore, value gained = £9,003 compared to present
From landlord’s viewpoint:

Freehold proposed interest = £147,149 + 3.8896x
If x = £12,000 then proposed interest = £193,781
Present interest = £193,413
Thus virtually same value compared to present interest
Conclusion
Both sides are better off with the proposed deal than at present (freeholder only very marginally) so the
transaction is viable.
The tenant gains more than the landlord (nearly £9,000 more).
If this additional gain is equally split between the two parties, then the premium payable by the tenant will
be say £4,500, payable at the time of surrender and renewal, with the new lease at the agreed initial rent
of £12,000 p.a.
3. Assumptions:
• The recent letting of a similar building provides good evidence of current market ARY at market rent:
£550,000/£6m = 9.16%.
• From comparables, market rent of subject building before refurbishment is £600,000 p.a. (4,000 sq.m.
NIA @ £150 per sq.m.) and after refurbishment will be £720,000 p.a. (4,000 sq.m. @ £180).
• Next rent review on existing lease is 3 years away.
• Full repairing and insuring lease so no outgoings need to be deducted from freeholder’s rental income.
• Under proposed lease the improvement work will be disregarded at the first rent review after 5 years,
thus the rent payable then will be the ‘unimproved’ MR and it will rise to the ‘improved’ MR at the
second review in 10 years’ time
• Leasehold interests are less attractive investments compared to freeholds and command slightly higher
ARYs; thus will use 10.5 per cent as leasehold ARY at market rent.
Existing freehold valuation

Term
× YP for 3 yrs @ 8.16% 2.570
£1,284,837
× YP perp def 3 yrs @ 9.16% 8.393
£5,035,762
SAY = £6,320,000

Existing leasehold valuation
Less rent payable £500,000 p.a
× YP for 3 yrs @ 10.50%
+ 3.0% & tax @ 30% 1.763
Market value (assignment value) = £176,309
SAY = £176,000
Proposed freehold valuation

Term
× YP for 5 yrs @ 8.16% 3.976
= £1,590,372
Reversion to intermediary rent
× YP 5 yrs @8.66% 3.924
× PV 5 yrs @8.66% 0.660
= £1,554,372
× YP perp def 10 yrs @ 9.16% 4.544
= £3,271,913
SAY = £6,410,000
Note: differential yields used in term and reversion to reflect proportionally more ‘secure’ or ‘safer’ rental
incomes compared to market rent.
Equivalent yield approach: proposed freehold valuation

Term
× YP for 5 yrs @ 9.00% 3.890
= £1,555,861
Reversion to intermediary rent
× YP 5 yrs @ 9.00% 3.890
× PV 5 yrs @ 9.00% 0.650
= £1,516,804
× YP perp def 10 yrs @ 9.00% 4.693
= £3,379,286
SAY = £6,450,000
Nominal equivalent yield = 9%
Note: Equivalent yield based on market evidence of 9.16 per cent and rounded down. This valuation
confirms market value found from ‘differential yield’ approach above.
Proposed leasehold valuation

Term
Less rent Payable £400,000 p.a.
× YP for 5 yrs @ 10.50%
+ 3.0% & tax @ 30% 2.673
= £855,437
Reversion
× YP for 5 yrs @ 10.50%
+ 3.0% & tax @ 30% 2.673
× PV 5 yrs @ 10.50% 0.607
= £194,719
Less costs of improvements (£750,000)
SAY = £300,000
Proposed leasehold valuation eliminating ‘double sinking fund error’

Annual sinking fund for 10 yrs @ 3.00% = 0.08723051
× gross tax factor @ 30% = 1.42857143
Annual sinking fund multiplier= 0.12461501
Term
Less annual sinking fund £134,263 p.a.
£185,737 p.a.
× YP for 5 yrs @ 10.16% 3.775
= £701,219
Reversion
Less annual sinking fund £134,263 p.a.
(£14,263) p.a.
× YP for 5 yrs @ 10.16% 3.775
× PV 5 yrs @ 10.16% 0.616
= (£33,194)
Capital replaced at end of lease
by sinking fund = £1,077,426
× Present value @ ARY of 10.16% = 0.380
= £409,400
£1,077,426
Less costs of improvements today = (£750,000)
SAY = £ 327,000
Summary and conclusion

• Freeholder better off by £90,000 or more.
• Tenant better off by at least £124,000 and maybe as much as £151,000.
• Could argue no premium payable, as both better off than now and especially as tenant will pay for
improvements.
• Alternatively, tenant pays premium of £34,000/2 = £17,000 or up to maximum of £61,000/2 = £30,500.
4. Valuation of tenant’s present interest

Rent receivable = £25,000
Less rent payable = £10,000
Net profit rent = £15,000
× YP 8yrs @ 8%+3% (tax 21%) 4.497
SAY = £67,500
Valuation of present freehold interest

Term
Net income = £10,000
× YP 8yrs @ 6% 6.21
= £ 62,100
Reversion
× YP perp def 8yrs @ 7% 8.314
= £207,850
Value = £269,950
SAY = £270,000
Note: term yield reduced by 1 per cent as term income a lot lower than reversionary income and so much
more ‘secure’.
Valuation of proposed freehold interest

× YP perp @ 7% 14.286
= £357,150
SAY = £357,000
Marriage value = Proposed freehold minus (Present leasehold + Present freehold) = £357,000 – (£67,500
+ £270,000) = £19,500
If parties agree to split marriage value 50/50 then price to be paid by tenant to buy out the landlord and
acquire the freehold interest will be:
Present freehold value + 50% of marriage value = £270,000 + £9,750
= £279,750 to be paid by tenant to purchase the freehold
5. Can use ‘rule of thumb’ or Jack Rose’s ‘Constant Rent’ formula.

Rule of thumb = 7 – 5 yrs = +2
× 1% (as low growth rate) = +2%
£60,000 plus 2% = £61,200 per annum
Constant rent:
(1 + 0.1)7 − (1 = 0.25)7 (1 + 0.1)5 − 1
k= ×
(1 = 0.1)7 − 1 (1 = 0.1)5 − (1 + 0.25)5
k = 1.0208
£60,000 × 1.0208 = £61,248 per annum
× YP for 65 yrs @ 8.50%
+ 3.0% & tax @ 30% 10.828
Market value (assignment price) = £3,031,906
SAY = £3,030,000
Alternatives: discounted cash flow, conventional dual rate but no tax or single rate no tax as per freehold
but at higher ARY:
× YP 65 yrs @ 9.2% 10.8339414
SAY = £3,030,000
7. Analysis period needs to be decided. Could look to analyse both deals either over the next 5 years or
the next 15 years. It may be each would give a different conclusion and it would depend on the client’s
requirements as to whether they are more interested in the shorter or longer-term investment strategy.
Possible analyses over next 5 years

Offer A
Rent received £60,000 p.a.
YP 1.5 yrs @ 7% 1.379
£82,740
YP 1.5 yrs @ 7.5% 1.371
× PV 1.5 yrs @ 7.5% 0.8971
£92,254
YP 2 yrs @ 8% 1.783
× PV 3 yrs @ 8% 0.7938
£141,540
Less reverse premium (£20,000)
Value = £296,534
Offer B
Less service charge
@ say 15% (£15,750) p.a.
Net rent received £89,250 p.a.
YP 5 yrs @ 8% 3.993
£356,375
Less legal costs (£7,350)
Value = £349,025
Note: legal costs assumed at 7 per cent of rental.
Offer B provides the significantly higher value, but offer A has better long-term security and the contribution
to the fitting-out may result in a better-presented property. The decision will depend on the requirements,
preferences and circumstances of the client, but as mentioned above, additional analysis may help them
reach a decision.
Possible analyses over next 15 years

Offer A
YP 1.5 yrs @ 7% 1.379
£82,740
YP 1.5 yrs @ 7.5% 1.371
× PV 1.5 yrs @ 7.5% 0.8971
£92,254
YP 2 yrs @ 8% 1.783
× PV 3 yrs @ 8% 0.7938
£141,540
Rent received (MR) £95,000 p.a.
YP 10 yrs @ 8% 6.71
× PV 5 yrs @ 8% 0.6806
£433,848
Less reverse premium (£20,000)
Value = £730,383
Offer B
Less service charge
@ say 15% (£15,750)
Net rent received £89,250 p.a.
YP 5 yrs @ 8% 3.993
£356,375
Relet at MR £95,000 p.a.
YP 9.5 yrs @ 8% 6.483
× PV 5.5 yrs @ 8% 0.6549
£403,338
Less legal costs now (£7,350)
Less legal/agents costs on relet (£14,250)
Value = £738,113
Notes: legals/estate agents fees on relet assumed @ 15% of MR. Assumed rental void of 6 months at end of
next 5 years to allow time for reletting.
Again, offer B provides the better overall value, but this time only slightly higher. It now becomes a much
harder choice between the two offers. To try to reach a final decision, a DCF analysis may help as shown
in the tables below
Offer A
Years Rental Costs Net cash YP/PV @ DCF Cumulative

incl flow 10.000% DCF
growth @
3%
0 £20,000 (£20,000) 1 (£20,000)
1 £60,000 £60,000 0.9091 £54,545
2 £67,500 £67,500 0.8264 £55,785
3 £75,000 £75,000 0.7513 £56,349
4 £100,000 £100,000 0.6830 £68,301
5 £100,000 £100,000 0.6209 £62,092 £277,073
6 £110,131 £110,131 0.5645 £62,166 (after 5 yrs)
7 £110,131 £110,131 0.5132 £56,515
8 £110,131 £110,131 0.4665 £51,377
9 £110,131 £110,131 0.4241 £46,706
10 £110,131 £110,131 0.3855 £42,460
11 £127,672 £127,672 0.3505 £44,748
12 £127,672 £127,672 0.3186 £40,680
13 £127,672 £127,672 0.2897 £36,982
14 £127,672 £127,672 0.2633 £33,620
15 £127,672 £127,672 0.2394 £30,564 £712,891
16 £148,007 £22,201 2.1763 £299,905 (after 15yrs)
NPV = £1,022,796
Offer B
Years Rental incl Costs Net cash flow YP/PV @ DCF Cumulative DCF
growth @ 3% 10.000%
0 £7,350 (£7,350) 1 (£7,350)
1 £89,250 £89,250 0.9091 £81,136
2 £89,250 £89,250 0.8264 £73,760
3 £89,250 £89,250 0.7513 £67,055
4 £89,250 £89,250 0.6830 £60,959
5 £89,250 £89,250 0.6209 £55,417 £330,978
6 £55,066 £14,250 £40,816 0.5645 £23,039 (after 5 yrs)
7 £110,131 £110,131 0.5132 £56,515
8 £110,131 £110,131 0.4665 £51,377
9 £110,131 £110,131 0.4241 £46,706
10 £110,131 £110,131 0.3855 £42,460
11 £127,672 £127,672 0.3505 £44,748
12 £127,672 £127,672 0.3186 £40,680
13 £127,672 £127,672 0.2897 £36,982
14 £127,672 £127,672 0.2633 £33,620
15 £127,672 £127,672 0.2394 £30,564 £737,669
16 £148,007 £22,201 2.1763 £299,905 (after 15yrs)
NPV = £1,037,575
Assumption made that, at end of 15 years, investment sold and agents/legal fees incurred. These DCF
analyses again show offer B to provide the higher NPV after 5 years (substantially) and 15 or 16 years
(marginally). Thus from a purely financial viewpoint, offer B is the best, but other considerations may lead
client to choose offer A (i.e. better presented property, initial extra security of income, removal of need to
relet building in 5 years’ time). Need to present the ‘fors’ and ‘againsts’ and leave client to make the final
choice.

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1. £450,000 × 231.5/189.4 = £550,026.36

2. Red Company dividend = 0.09 × 50p = 4.5 pence

3. £18,275 × 100/£400,000 = 4.569%

4. £5,244 × 100/(10,000 × £8.37) = 6.265%

3. 1.058 × £3,000 = £4,432.37

4. 1.0510 × £22,500 = £36,650.13

5. Return on investment minus expected average inflation rate

6. 1.0619 × £17,000 = £51,435.19

7. 1.082 × £6,500 = £7,581.60

8 Amount of £1 for 7 years @ 4.5% = (1+0.045)7 = 1.36086

9. 1.064 × 1.055 × £12,000 = £19,335.31

10. 1.0455 × 1.0556 × £50,000 = £85,914.45

13. 1/1.042526 = 0.338862

14. £8,500 × 1/1.0331 = £3,399.89

15. £220,000 × 1/1.0918 = £46,638.62

16. £42,000 × 1/1.068 = £26,351.32

17. PV for 8 years @ 5% = 1/(1+0.05)8 = 0.67839

18. PV of £80,000 in 4.5 yrs @ 4.85% = £80,000 × 1/(1.0485)4.5

19. 28 months = 28/12 = 2.333 years

21. £450,000 × 1/1.072525 = £78,213.19

22. £10,500 × 1/1.0353 = £9,470.40

23. £78,000 × 100/£1,000,000 = 7.8%

24. £320,000 × 100/£4,000,000 = 8%

25. Amount of £1 per annum for 8 years @ 6% = (1.068 – 1)/0.06

26. 1.047 × £50,000 = £65,796.59

2. £150,000 × 0.03/(1.0312 – 1) = £10,569.31 per annum

3. £50,000 × 0.045/(1.0457 – 1) = £6,235.07 per annum

4. £80,000 × 0.0325/(1.032515 – 1) = £4,223.09 per annum

5. £75,000 × 0.0425/(1.042518 – 1) = £2,858.01 per annum

6. Net of tax asf rate = 5.5% × (100 – 40)/100 = 3.3%

7. £4,000 × (1.04756 – 1)/0.0475 = £27,037.05 saved so far

9. 5% × (100 – 28)/100 = 3.6% net asf rate

10. (1.1315 × 0.13)/(1.1315 – 1) = £0.154742 per annum

11. £160,000 × (1.1118 × 0.11)/(1.1118 – 1) = £20,774.86 per annum

12. £250,000 × (1.07525 × 0.075)/(1.07525 – 1) = £22,427.67 per annum

13. £25,000 × (1.1255 × 0.125)/(1.1255 – 1) = £7,021.35 per annum

14. £190,000 × (1.08520 × 0.085)/(1.08520 – 1) = £20,077.48 per annum

16. £3,852.74/((1.087510 × 0.0875)/(1.087510 – 1)) = £24,999.99

17. First find the annual repayments: £15,000 × (1.126 × 0.12)/(1.126 – 1)

1. YP perp number from each of these all risks yields is:

2. ARY% represented by the following YP perp numbers is:

3. £200,000 × 100/6.75 = £2,962,962.96

4. £80,000 × 100/8.5 = £941,176.47

5. £1,200,000 × 8/100 = £96,000 per annum

7. Market rent (MR) = MV × ARY/100

8. Annual rate of return on property = All-risks yield (ARY)

9. (1.0915 – 1)/(1.0915 × 0.09) = 8.0606884

10. £60,000 × YP 3 yrs @ 7.25% = £156,743

11. £87,500 × YP 2 yrs @ 11% = £149,846

12. £200,000/£38,350 = YP for 10 yrs @ x% = 5.215123859

13. YP single rate for 7 yrs @ 7.5%

14. £2,000,000/YP 15 yrs @ 12% = £2M/6.8108645

15. 1/(1.136 × 0.13) = 3.694757903

16. £1,200,000/YP perp def 3 yrs @ 6% = £1,200,000/13.9936547

17. £400,000 × YP perp def 2 yrs @ 11% = £2,951,354

18. £60,000 × YP perp def 3 yrs @ 8% = £595,374

19. YP 12 yrs @ 9% = 7.1607253