A year ago, you purchased a hotel for $$25$ million using $100\%$ equity. In the last year, the hotel generated a property$-$before$-$tax cash flow

$($PBTCF$)$ of $$1,5$ million, and the PBTCF is expected to grow at $2\%$ per year for the foreseeable future. Presently, you decided to sell the

hotel, with a current PBTCF$-$based cap rate of $5,5\%.$

Assuming the hotel's situation is stabilized, and the direct capitalization method is applied to estimate the current market value, what

would be your total return on investment? Please ignore any transaction costs.

a$.15,09\%$

b$.$ Insufficient Information

c$.17,27\%$

d$.17,39\%$

Your answer is correct.

The correct answer is:

$17,27\%$