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Can you show me how to work this out? yes; in detail. 13. An investor is considering the purchase of a small office building. The
Can you show me how to work this out? yes; in detail.
13. An investor is considering the purchase of a small office building. The NOI is expected to be the following: year 1, $200.000; year 2, $210,000; year 3, $220,000; year 4, $230,000; year 5, $240,000. The property will be sold at the end of year 5 and the investor believes that the prop- erty value should have appreciated at a rate of 3 percent per year during the five-year period. The investor plans to pay all cash for the property and wants to earn a 10 percent return on investment (IRR) compounded annually a. What should be the property value (REV) at the end of year 5 in order for the investor to earn the 10% IRR? b. What should be the present value of the property today? c. How can the value at the end of year 5 be estimated today if the present value today is unknown? d. Based on your answer in (b), if the building could be reproduced for $2.300,000 today, what would be the underlying value of the landStep by Step Solution
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