Question
Real Estate Finance: A proposed investment will return a seven-year income stream with first year income of $1,750,000 growing at 6% per year. There is
Real Estate Finance:
A proposed investment will return a seven-year income stream with first year income of $1,750,000 growing at 6% per year.
There is no terminal value.
What is the IRR on the investment if that income stream is purchased for $6,500,000? (Assume annual compounding.)
| A. | 14.50% |
| B. | 19.00% |
| C. | 23.88% |
| D. | 12.50% |
|
Also, based on the information provided above what is the Investment multiple for that same investment? | ||
| A. | 1.26 | |
| B. | 2.26 | |
| C. | 0.67 | |
| D. | 1.67 | |
|
Again using the information from above what is the Investment multiple if the purchase price is based on a 12.5% required rate of return? Again, assume annual discounting. | ||
| A. | (0.13) | |
| B. | 0.88 | |
| C. | 0.60 | |
| D. | 1.60 | |
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