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problem: The table below shows the projected net cash flows [including reversion] for Property A & Property B. If both properties sell at fair market value for a cap rate [initial and terminal net cash yields] of seven percent, then which of these two properties is perceived to be riskier by the market? describe your answer.

Annual net cash flow projections for two properties ($1,000,000s):

Year:

1

2

3

4

5

6

7

8

9

10

A

$1.0000

$1.0000

$1.0000

$1.0000

$1.0000

$1.0000

$1.0000

$1.0000

$1.0000

$15.2857

B

$1.0000

$1.0200

$1.0404

$1.0612

$1.0824

$1.1041

$1.1262

$1.1487

$1.1717

$18.6093

 

 

 

Basic Finance, Finance

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