Calculate the expected value of the property in $75$ years, when it reverts back to the ultimate property owner $($this is the

terminal value'$\text{'}$ at year $75).$

To calculate the terminal value, assume that the NOI in year $76$ is simply the rental income minus expenses in year $75$ plus $10\backslash \%.($Note that the ultimate owner doesn't pay herself ground lease payments, so no need to include them.$)$

To calculate the terminal value in year $75,$ use the NOI in year $76$ and a "terminal cap rate." The terminal cap rate equals to the current cap rate plus $0\mathrm{.}5\%.$ Let's use $7\mathrm{.}5\%$ for the terminal cap rate.

NOTE: To be clear, we are not looking for the present value here, just the expected market price in year $75.$ If the property is on the market in $75$ years, what price will it sell for?

Flag question: Question $9$

Question $9$

Assume that the property's expected value at the end of $2093$ years is $$24$m$.$

What is the present value of this expected value as of the end of $2018?$ Use a discount rate of $6\%.$