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Your firm is considering the purchase of an office building with a projected life of 100 years and has a holding period of six years.
Your firm is considering the purchase of an office building with a projected life of 100 years and has a holding period of six years. You, as your firm's resident geek, estimate that year 5 NOI will be $80,000.00, and this NOI is expected to grow at an annual rate g of 2% over the infinite future. The CFO of your firm will make the purchase if the building's required rate of return over 100 years is 12%. Using the terminal cap rate implied by these data, what is the implied reversion value (REV) of this building in year 5? none of the above $666, 667.10 $800,000.00 $571, 429.60 $4,000,000.20
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