Harry decides to purchase an apartment building as an investment. He pays $6,000,000 for the building. The building has a net income of $150,000, annual depreciation $150,000, annual taxes of $75,000, and annual interest payments of $105,000.
a. Calculate the building’s cap rate.
b. One year later, the price of the building goes up to $7,000,000. Calculate the new cap rate.