An investment company is considering the purchase of an office property. After a careful review of the market and the leases that are in place, the company believes that next year's cash flow will be $100,000. It also believes that the cash flow will rise in the amount of $5,000 each year for 10 years and then grow at 2% per year indefinitely. The investment company believes that it should earn an IRR (required rate of return) of 12%.

Assume that the value of property today is $1,300,000 and 1,500,000 for the next year, what is the current, or "going-in", cap rate for this property?

7.69%

8.08%

7.00%

6.67%