Problema commerical real estate property has been evaluated, Ask an Expert

Accounting

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:

Question 1: Assuming a cost of capital of 8%, what is the value of the property?

Question 2: What is the property's Internal Rate of Return (IRR)?

Note: Please show how you came up with the solution.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91173610

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