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1. A real estate investment trust is considering purchasing a rental property that provides annual cash flows (in the form of rent) of $0.5 Million.

1. A real estate investment trust is considering purchasing a rental property that provides annual cash flows (in the form of rent) of $0.5 Million. Rent is expected to increase by 2% annually for the foreseeable future. If the return requirement is 22% and the rental property is listed at $2.5M determine if the property is over-or-under-valued.

Select one:

  1. Listed property is over-valued by $500,000

  2. Listed property is priced correctly

  3. Listed property is under-valued by $292,727

  4. Listed property is over-valued by $292,727

  5. Listed property is under-valued by $500,000.

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