Question
To overcome the potential shortcomings of single-year decision making metrics, many investors in real estate also perform multiyear discounted cash flow (DCF) valuation. DCF valuation
To overcome the potential shortcomings of single-year decision making metrics, many investors in real estate also perform multiyear discounted cash flow (DCF) valuation. DCF valuation differs from the single-year ratio analysis in all of the following ways EXCEPT:
A. | Only with DCF must the investor estimate an appropriate investment horizon accounting for how long they will hold the property. | |
B. | Only with DCF must the investor select the appropriate yield at which to discount all expected future cash flows. | |
C. | Only with DCF must the investor make explicit forecasts of the property's net operating income for each year in the expected holding period. | |
D. | Only with DCF must the investor use a defensible cash flow estimate that incorporates appropriate measures of income and expenses, comparable properties and social/legal environment conditions |
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