An investor is thinking of buying a real estate.

The asset's projected stabilized NOI for the following year is $ 5,400,000 and it is currently selling for $ 65 million based on the market cap rate perception.

The investor has a required return of 9% on this investment. Based on market forecasts, they have estimated a 1.5% growth per annum.

Based on their internal cap rate perception, is it a good buy and why?

a) The asset is selling at a lower cap rate compared to your estimate (6.1% > 10.5%). Therefore, it is over-valued. It is worth the buy.

b)The asset is selling at a higher cap rate compared to your estimate (8.3% > 7.5%). Therefore, it is under-valued. It is not worth the buy.

c)The asset is selling at a lower cap rate compared to your estimate (6.1% > 10.5%). Therefore, it is over-valued. It is not worth the buy.

d) The asset is selling at a higher cap rate compared to your estimate (8.3% > 7.5%). Therefore, it is under-valued. It is worth the buy.