Assume the following expected annual cash flows from operating a office property investment: Year 1 = $225,000; Year 2 = $236,500; Year 3 = $248,000 Year 4 = $259,500; Year 5 = $271,000. If the net proceeds from the sale in Year 5 are $4.9 million determine the maximum price an investor is willing to pay for the property today if she requires a 10 percent return on her investments and the going-in cap rate is 5.5%?

Assume the following expected annual cash flows from operating a office property investment: Year 1 = $225,000; Year 2 = $236,500; Year 3 = $248,000 Year 4 = $259,500; Year 5 = $271,000. If the net proceeds from the sale in Year 5 are $4.9 million determine the maximum price an investor is willing to pay for the property today if she requires a 10 percent return on her investments and the going-in cap rate is 5.5%?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 27P

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