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Consider the following data showing the cash flows per year from a real estate property: year 1 2 3 4 5 Cash flow $21,000

Consider the following data showing the cash flows per year from a real estate property: year 1 2 3 4 5 Cash flow $21,000 $22,000 $23,000 $24,000 $25,000 After the 5th year, cash flows are expected to rise at a constant rate of 1.5% per year for the many years in the future. Your cost of money (interest paid on the loan) is 4.5% per year. A. Calculate the appraisal value of the house. B. Define and calculate the cap rate. Explain what it means.

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