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Problem 1 0 - 6 Athena Investment Company is considering the purchase of an office property. After a careful review of the market and the
Problem
Athena Investment Company is considering the purchase of an office property. After a careful review of the
market and the leases that are in place, Athena believes that next year's cash flow will be $ It also
believes that the cash flow will rise in the amount of $ each year for the foreseeable future. It plans
to own the property for at least years. Based on a review of sales of properties that are now years
older than the subject property, Athena has determined that cap rates are in a range of Athena
believes that it should earn an IRR required return of at least percent.
Required:
a What is the estimated value of this office property assume a terminal cap rate
b What is the current, or goingin cap rate for this property?
Complete this question by entering your answers in the tabs below.
Required
Required B
What is the estimated value of this office property assume a terminal cap rate
Note: Do not round intermediate calculations. Round your final answer to the nearest dollar amount.
Estimated value of the property
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