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Problem:

A commerical real estate property has been evaluated by an appraiser, who estimates the following Net Operating Income for property over the next 6 years. Initially, the property will have $90,000 Net Operating Income, and then will jump to $110,000, and then grow consistently at 5% thereafter.

Required:

Assuming a cost of capital of 8%, what is the value of the property? What is the property's Internal Rate of Return (IRR)? Calculate in excel.

Note: Provide support for your rationale.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M91162879

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